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Is there a limit on how many trades I can make per week?

post #1 of 17
Thread Starter 
Hello Everyone,

I am a Newbie. I have been learning about the stock market and trading for a long time now, plus I have been paper trading over the past several months. Now I am almost ready to open an online broker account so I can start trading.

Since I want to ‘swing trade’, I have been hearing many conflicting stories about this issue, so I would like to try to get some clarification from you seasoned traders out there.

Mainly, I want to buy carefully researched stocks (that I feel will go up in value in the next several days of my buying it) and then sell it once it goes up in value. I plan to have a ‘stop’ of some kind in place at the time that I buy the stock, so that the 'stop' will trigger the stock to be sold. Ideally, I would like to buy and sell 2 to 3 stocks per week (i.e. 4 to 6 trades per week or 2 or 3 buys AND 2 or 3 sells). However what I have been told is that each buy will constitute one trade, each sell will constitute one sell, but a trader can only do no more than 3 trades per week, otherwise they will get flagged as a patterned day trader. However by law, in order to be a day trader, one must have at least $25,000 in a broker account at all times, otherwise they will be banned from making trades. Is this all true?

Now with that being said, upon learning more about Margin Accounts, I do not plan to use or borrow any money to make my trades and nor will I be using a Margin Account. I will solely be making basic ‘buy’ and ‘sell’ (with a stop in place on each one) trades (nothing more complicated than that), yet I do not understand if I am trading with my own money and not borrowing any money from anyone, why is it that I can not make as many trades (buys and sells) that I want each week?

I would appreciate any answers from you seasoned traders out there. Thank you in advance.

Glen
post #2 of 17
A day trade is a buy and a sell all in the same day. You are only allowed 3 of these per five rolling days. You can buy 100 different stocks on Monday and then sell them on Tuesday and none would be a daytrade. I'll post a link to the end all information that explains it the rule.
post #3 of 17
http://www.hotstockmarket.com/forums...ad.php?t=58066

A cash account generally isn't held to the day trade rule, but you have to have settled cash to trade anyways. After you sell a stock, it takes 3 days for the funds to settle and be available in a cash account.
post #4 of 17
paper trade before you go live

if u cant make profit paper trading dont try real
post #5 of 17
Thread Starter 
Hey there Simonyadig. Thanks for the expeditious reply. Up until your reply, I had not given much thought to allowing my sold stock funds to take 3 days to settle in my account. So to ensure that I do not end up accidentally shooting myself in the foot (with special regard to using ‘various stops’), I will try to stick to making 1 or 2 trades per five rolling days, to stay on the safe side. Thanks again for your help and the link for “Day Trading Margin Requirements: Know the Rules”, it was greatly appreciated.

Bazooka85, thank you for your help. I have been successfully paper trading for several months now. I am about ready to go live. I just need to learn some of the nuts and bolts about using a broker account and learn some of the trading rules before I open my account.

Regards,

Glen
post #6 of 17
He's Quagmire, Quagmire
You never really know what he's gonna do next
He's Quagmire, Quagmire
Giggity giggity giggity giggity, let's have sex!

post #7 of 17
You can sign up with a cash brokerage still

Make sure you know the rules by full definition because it becomes very emotional recalled it during your trading expedition (i've been there)
post #8 of 17
My broker (thinkorswim; check them out if you're hunting for a broker, especially for stock options) just added a day trade tracker to their trading platform that has been a huge boon for me. It keeps a running tally of how many day trades that I have available and gives me a warning when submitting a trade if I don't have any day trades remaining. Check with your broker to see if they have the same feature in their platform and suggest it if they don't.

For those of us who keep our active trade knot small and get screwed by the day trade rules, it's a big help as you don't want to exceed the limit and get slapped with a time out.
post #9 of 17
Thread Starter 
Thanks Bazooka85 and Memitim! I greatly appreciate your additional input and help as well.

Quagmire
post #10 of 17
Yeah...but how do you feel now?

post #11 of 17
Quote:
Originally Posted by simonyadig View Post
A day trade is a buy and a sell all in the same day. You are only allowed 3 of these per five rolling days. You can buy 100 different stocks on Monday and then sell them on Tuesday and none would be a daytrade. I'll post a link to the end all information that explains it the rule.
Wait - isn't it four trades per five rolling days? That seems to be what the requirements state, unless brokers add an additional requirement of three.

I know that that is true at least at Zecco, and I believe at optionsxpress as well (although the latter says they'll also knock you if you use intraday funds "excessively" on a margin-enabled account, not sure what they mean by that).

FRom Zecco's site:
Quote:
How did/do I become a Pattern Day Trader?
Any account that makes 4 day trades in a five day business period will be classified a Pattern Day Trader.
I might be wrong.
post #12 of 17
Your quote from Zecco reaffirms what I said.

You're allowed to make 3 daytrades per 5 rolling days. Once you make 4, you are considered a PTD. It's an SEC regulation and all brokers are supposed to follow it.
post #13 of 17
Quote:
Originally Posted by simonyadig View Post
Your quote from Zecco reaffirms what I said.

You're allowed to make 3 daytrades per 5 rolling days. Once you make 4, you are considered a PTD. It's an SEC regulation and all brokers are supposed to follow it.
Ahh. Indeed, my mistake. Good thing I read this thread.
post #14 of 17
just don't worry if you violate the rules, i've done it twice

consecutive quarters

they can't take your money or anything, they freeze your account, but give you time to close positions
post #15 of 17
Quote:
Originally Posted by bazooka85 View Post
just don't worry if you violate the rules, i've done it twice

consecutive quarters

they can't take your money or anything, they freeze your account, but give you time to close positions
I think Zecco gives you a one time "grace," but do you know how long they limit your account to liquidating only?

Oh and as it turns out, since my broker broke my short order yesterday into two parts, and I covered all my shares in one order, that actually counts as two trades and I went back and looked... looks like I'm already out of trades for the week (did a trade on Friday too) .

It is a good thing I checked - Zecco doesn't let you know how close you are to running out of daytrades - but they do define examples of daytrading (like what happened to me) in their FAQ.



Oh, and has anyone heard of Alliance Trader? Well I'm sure you have, but has anyone actuallly used them? It seems like their commissions are a bit high but it might be worth it since they are not subject to our PDT rules (based out of Jamaica) and extend up to 1:4 margin with just around $2k starting capital; and from the limited amount I've read elsewhere, it seems they aren't up to anything funny and are a legitimate broker, subject to the financial board in Jamaica.

And then there's all those sub-contractor trading things but... meh, it seems that you basically become a slave to another company and get to keep very little of your profits. I'm not a fan of those types of schemes whatsoever.

I just wonder... it would take a while to get everything set up and transferred over for Alliance, and I'm not even sure if you can directly link a bank account, or just wire transfers (which I'm not a fan of)

The obvious solution would be to just overnight trade, and then use up your three per week, but I still obviously need to get more experience with overnights. Needless to say I've lost plenty of money in the past few months.

At any rate I'd obviously much prefer staying in the States where my accounts are all already existing. Changing over would be a pretty inconvenient and lengthy process (mostly due to the very un-modern time periods that it takes for our banks to process ACH funds transfers).
post #16 of 17
First find out what qualifies as a daytrade for your broker. Sometimes it's the number of opening trades and sometimes it's the number of closing trades. Also, if your broker broke your order into separate lots, that shouldn't make it more than 1 daytrade unless you canceled the order after a partial fill and resubmitted it. An order can get broken into numerous lots, but as long as you only entered one trade, it should count as 1.

An option you have is to open up multiple broker accounts in order to get yourself more daytrades. I don't think I'd be too comfortable having my $$$ in an offshore account.
post #17 of 17
Oh, and watch it if you use option spreads, since each leg will count as a single trade. You can get bent over hard if your trade blows through the stop on a complex spread. I guess the idea is to make sure that us poor folk stay broke by limiting us to pathetic buy-and-hold strats or keep us out of trading altogether by freezing our accounts for the crime of setting protective stops in this highly volatile market. Yeah, I think that the current form of the PDT rules suck but I guess the gummint's gotta protect us ignorant poor folk from ourselves.

That's why I just accept the increased risk of single option trades and take a couple days completely off whenever my count hits three. Damned if I'll ever have a trade on without the complete confidence in securing it with a stop that is ready to trigger the second the position is opened. Having my ability to day trade frozen for three months would effectively end my trading for those three months because of the inability to set a reliable stop. I highly suggest that you adopt the same policy because the vast majority of my day trades have been due to unexpectedly triggered stops that would have cost me plenty had they not been available.
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