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Day Trader .. Clarification

post #1 of 14
10/18/08 at 7:22pm
Thread Starter 
Ive read terms on this and the "security" wording is getting me lost.
Can someone clarify it a bit better...

- Are they referring to the same stock? FRE FRE or AIG AIG
- Are they referring to the same sector? Energy, Fianicals,

"as any customer who executes 4 or more round-trip day trades within any 5 successive business days"

- So overall if i completed 4- (buy and sell - one complete trip - 4 times) over 1 week then im a day trader?

Buy FRE Monday Sell Tuesday
Buy AIG Tuesday sell Wednesday
Buy FRE on Wednesday and sell on Thursday
Buy HTM Thursday and sell Friday *energy*

*notice the last stock is a different sector*

With this example am i a day trader?
or it has to be within the same stock or sector - 4 times during 1 week?

In general i know those rules apply to day trading but ive also seen mention of open positions..
If i have open positions at the end of close, does that rule still apply - are you still labled a day trader is you have open (non-sold) holdings?


If i buy 10 Stocks over 1 week, and sell 5 at the end of the week (friday), i would assume im concidered a day trader?

if i buy 10 stocks this week and sell 5 next week, im not concidered a day trader? because its not a round trip within the same week? (buying in week A and selling in week B)
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post #2 of 14
10/18/08 at 7:37pm
also are options considered securities?
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post #3 of 14
10/18/08 at 8:02pm
Security refers to either a stock or option. You have to buy and sell the same exact security in the same day for it to count as a day trade. You are allowed 3 day trades per 5 rolling business days without being considered a pattern day trader.
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post #4 of 14
10/18/08 at 8:07pm
What if you are considered a pattern day trader? You have to pay tax's? get a license? It's illegal? Whats the deal?
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post #5 of 14
10/18/08 at 8:12pm
Quote:
Originally Posted by bmathews View Post
What if you are considered a pattern day trader? You have to pay tax's? get a license? It's illegal? Whats the deal?
In order to be a PDT you need to maintain $25k worth of equity in your account. If you trade over the limits of a non-PDT and don't have the equity, your broker will give you a PDT call and request you deposit enough to meet the minimum, though the first time you most likely will just get a warning. If you get a second and can't meet the equity requirement, your account will most likely be bumped down to a cash account, meaning you can only trade with settled funds. Some brokers may have stricter rules and may freeze your account from opening new positions, though I'm not sure about that.
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post #6 of 14
10/18/08 at 9:27pm
Thread Starter 
Simon thanks brudda for the response..


if one broker labels you as this... but you go to another service.. does the SEC or someone keep records of this? i assume it goes by your name?

So for it to be considered a day trade.. it has to be the EXACT same STOCK?
So i buy FRE and sell FRE in the same day thats - 1

I buy AIG and sell it a day later thats - 2 ?

what about if i buy 5 stocks on Monday and then dump them on friday?
I assume thats not day trading then since it was held for longer than the purchasing day?

Overall are they referring to the BUYING and SELLING of the EXACT SAME STOCK on the SAME day?
Not yelling just wanna emphasize.. dont wanna make a mistake


What about this open positions clause i keep seeing mentioned as the way out of this day trading clause in a sense??
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post #7 of 14
10/18/08 at 9:34pm
Quote:
Originally Posted by mjoke View Post
- Are they referring to the same stock? FRE FRE or AIG AIG
- Are they referring to the same sector? Energy, Fianicals,
if you buy fre and aig today and sell both today, then thats 2 daytrades

Quote:
Originally Posted by mjoke View Post
- So overall if i completed 4- (buy and sell - one complete trip - 4 times) over 1 week then im a day trader?
Yes

Quote:
Originally Posted by mjoke View Post
  1. Buy FRE Monday Sell Tuesday
  2. Buy AIG Tuesday sell Wednesday
  3. Buy FRE on Wednesday and sell on Thursday
  4. Buy HTM Thursday and sell Friday *energy*
*notice the last stock is a different sector*

With this example am i a day trader?
or it has to be within the same stock or sector - 4 times during 1 week?
  1. No - swing trade
  2. No - swing trade
  3. No - swing trade
  4. No - swing trade

And its 4 round trips over a 5 day rolling period, not just a week

Quote:
Originally Posted by mjoke View Post
In general i know those rules apply to day trading but ive also seen mention of open positions..
If i have open positions at the end of close, does that rule still apply - are you still labled a day trader is you have open (non-sold) holdings?


If i buy 10 Stocks over 1 week, and sell 5 at the end of the week (friday), i would assume im concidered a day trader?

if i buy 10 stocks this week and sell 5 next week, im not concidered a day trader? because its not a round trip within the same week? (buying in week A and selling in week B)
Basically, the day trading rule in general means this.
If you buy stock xyz on Monday and sell xyz on that same day, then that is considered a daytrade. If you buy stock/option xyz on Monday and sell it on Tuesday, that's a swing trade and does not violate any rules. You can buy every stock possible on Monday and sell them all on Tuesday and that would still just be a swing trade. The only time the day trade rule comes into effect is if you buy a stock/option and sell on that same day.

Another example of day trade is I buy 5 contracts, then buy 5 more , sell 5, then sell the other 5, that's also 2 day trades.
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post #8 of 14
10/18/08 at 9:40pm
Thread Starter 
Ahh... see im doing swings.. not day trades
thats where i was getting worried and lost.

LOL ill be printing this out and posting it on my wall

So - Same day executions, are Day trades.. ( buy and sell same stock on the same day)

So i have AIG - i bought last week. IF i sell monday and rebuy it the same day, and then sell again.... thats a day trade... ANYTHING issued on the SAME STOCK on the SAME DAY for a FULL execution (buy and sell - 1 cycle = 1)

We need REP points on here.. so ppl who help can be REPPED

I know im kinda repeating myself


Quote:
Originally Posted by Journeyman98 View Post
if you buy fre and aig today and sell both today, then thats 2 daytrades



Yes


  1. No - swing trade
  2. No - swing trade
  3. No - swing trade
  4. No - swing trade

And its 4 round trips over a 5 day rolling period, not just a week



Basically, the day trading rule in general means this.
If you buy stock xyz on Monday and sell xyz on that same day, then that is considered a daytrade. If you buy stock/option xyz on Monday and sell it on Tuesday, that's a swing trade and does not violate any rules. You can buy every stock possible on Monday and sell them all on Tuesday and that would still just be a swing trade. The only time the day trade rule comes into effect is if you buy a stock/option and sell on that same day.

Another example of day trade is I buy 5 contracts, then buy 5 more , sell 5, then sell the other 5, that's also 2 day trades.
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post #9 of 14
10/18/08 at 9:42pm
Quote:
Originally Posted by mjoke View Post
Simon thanks brudda for the response..


if one broker labels you as this... but you go to another service.. does the SEC or someone keep records of this? i assume it goes by your name?

So for it to be considered a day trade.. it has to be the EXACT same STOCK?
So i buy FRE and sell FRE in the same day thats - 1

I buy AIG and sell it a day later thats - 2 ?

what about if i buy 5 stocks on Monday and then dump them on friday?
I assume thats not day trading then since it was held for longer than the purchasing day?

Overall are they referring to the BUYING and SELLING of the EXACT SAME STOCK on the SAME day?
Not yelling just wanna emphasize.. dont wanna make a mistake


What about this open positions clause i keep seeing mentioned as the way out of this day trading clause in a sense??
If you open another account at another broker, as long as you don't transfer funds from the day trading account, or move your stocks/options, to your new account they will not know.

Yes its the exact same stock on the exact same day, not buy today and sell tomorrow type of thing.

The best way to be able to trade without worrying about being a day trader is to use a cash account. Stocks funds clear 3 days after the sell , T+3 and options clear the next day T+1. I can give you more details about this from a thread on here, I'll have to find it though. I'll post it in a minute.
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post #10 of 14
10/18/08 at 9:45pm
Thread Starter 
Ya my account is cashed based. I go make deposits n stuff... i prefer it that way.
Been lookin at Zecco... free trades are nice.. but the mth is almost over.. so ehhhhh
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post #11 of 14
10/18/08 at 10:16pm
Glad I could help.
One other thing, see bold statement below in your post.

Same day executions are day trades, but it only applies to when you buy the stock the same day and sell it the same day, or short it the same day and buy it the same day. Since you have AIG and if you were to sell it on Monday that would be a swing trade, then you could buy it Monday and sell it also Monday, and that would be considered a day trade.

Now with a cash account that can get tricky. If you had all your cash tied up in AIG going into Monday, and you sold it on Monday morning, you could buy again, but would not be able to sell those shares until the money you got for selling AIG was settled. That's the only problem when it comes to cash accounts, the free ride rule.

Here's the link to the other thread regarding day trading in a cash account.
http://www.hotstockmarket.com/forums...ad.php?t=57881


Quote:
Originally Posted by mjoke View Post
Ahh... see im doing swings.. not day trades
thats where i was getting worried and lost.

LOL ill be printing this out and posting it on my wall

So - Same day executions, are Day trades.. ( buy and sell same stock on the same day)

So i have AIG - i bought last week. IF i sell monday and rebuy it the same day, thats a day trade... ANYTHING issued on the SAME STOCK on the SAME DAY for a FULL execution (buy and sell - 1 cycle = 1)

We need REP points on here.. so ppl who help can be REPPED

I know im kinda repeating myself
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post #12 of 14
10/18/08 at 11:23pm
Quote:
Originally Posted by simonyadig View Post
In order to be a PDT you need to maintain $25k worth of equity in your account. If you trade over the limits of a non-PDT and don't have the equity, your broker will give you a PDT call and request you deposit enough to meet the minimum, though the first time you most likely will just get a warning. If you get a second and can't meet the equity requirement, your account will most likely be bumped down to a cash account, meaning you can only trade with settled funds. Some brokers may have stricter rules and may freeze your account from opening new positions, though I'm not sure about that.
Now is this with all online sites? I use sharebuilder and I believe I've meet the requirements of being a DT and I haven't gotten a message or anything, Why do they require 25k anyways? what's the point in that?
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post #13 of 14
10/18/08 at 11:37pm
Thread Starter 
Ya sorry i missed a sell execution on that AIG example post to make it a valid statement edited.
So now that is settled on how to avoid being pegged as one...

*switching sides on day trading - cash account vs funds*
In order to avoid settling funds you need to have 25,000 in a account, (is that liquid or holdings?) once that is established are there a set limit of executions you can preform?

Thanks ill look at the other thread also

Quote:
Originally Posted by Journeyman98 View Post
Glad I could help.
One other thing, see bold statement below in your post.

Same day executions are day trades, but it only applies to when you buy the stock the same day and sell it the same day, or short it the same day and buy it the same day. Since you have AIG and if you were to sell it on Monday that would be a swing trade, then you could buy it Monday and sell it also Monday, and that would be considered a day trade.

Now with a cash account that can get tricky. If you had all your cash tied up in AIG going into Monday, and you sold it on Monday morning, you could buy again, but would not be able to sell those shares until the money you got for selling AIG was settled. That's the only problem when it comes to cash accounts, the free ride rule.

Here's the link to the other thread regarding day trading in a cash account.
http://www.hotstockmarket.com/forums...ad.php?t=57881
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post #14 of 14
10/31/08 at 1:02am
Thread Starter 
Does this day trade rule apply to traders in canada and other countries?
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