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baseballeyeq

Question about trade (stock) settlements...

By baseballeyeq, in Beginners Forum

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baseballeyeq    10

baseballeyeq
Posted

Hi. I am rather new but familiar with a three day period where you have to wait for a stock trade to settle. For example: I can buy Stock A then Sell Stock A, but if I buy another stock I cant sell that until the three days from my first buy are over (because the funds have to "settle"). Does this same 3-day settlement period apply to daytrading? If one wants to buy and sell several times (say 10) in a single day, does there have to be enough "settled" money to cover all of those trades, or am I restricted to the amount of sellted funds/margin that I have available. Does the $25,000-$30,000 account minimum or margin trading have anything to do with being able to trade many times in a day. Basically what I am asking is: can a daytrader (with the account minimum requirement) buy and sell as many times in a day as they would like?

 

Any help would be greatly appreciated. Thanks.

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Soultrader    12

Soultrader
Posted
Hi. I am rather new but familiar with a three day period where you have to wait for a stock trade to settle. For example: I can buy Stock A then Sell Stock A, but if I buy another stock I cant sell that until the three days from my first buy are over (because the funds have to "settle"). Does this same 3-day settlement period apply to daytrading? If one wants to buy and sell several times (say 10) in a single day, does there have to be enough "settled" money to cover all of those trades, or am I restricted to the amount of sellted funds/margin that I have available. Does the $25,000-$30,000 account minimum or margin trading have anything to do with being able to trade many times in a day. Basically what I am asking is: can a daytrader (with the account minimum requirement) buy and sell as many times in a day as they would like?

 

Any help would be greatly appreciated. Thanks.

 

 

Here is statement from the SEC located here: Day Trading

 

"Under the rules of NYSE and NASD, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts."

 

 

Once you have the $25,000 account setup you are able to trade multiple times a day without a limit. I believe for some brokerage firms that minimum is $35,000.

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Robert2617    10

Robert2617
Posted

TradeStation requires $30,000. With TS (and stocks), if you have 4 round trips in any 5 day period, they will classify you as a pattern day trader and request the additional funds to equal $30K. Until you send them the money, they will only let you sell what you own and you cannot buy anything else.

 

Again with TS, if you fund your acct with the minimum, $5,000, you are only allowed 3.5 round trips in any 5 day period.

 

As far as the "T3" rule, it doesn't come into play as much with TS because the minimum non-pattern acct will have a margin equal to the acct balance.

 

The T3 rule goes like this:

Buy X and use all your funds and sell it the same day. You can buy Y with the funds you have coming, the same day, but you cannot sell it until the funds actually clear, three days later. In other words you could be stuck for 3 days holding a stock even if it is going down.

 

T3 Rule and Pattern Day Trading rules are two different sets of rules.

 

On the other hand, trading Futures does not have either rule. You can trade as much as you can stand because everything is settled that day. The catch is that you have to have a seperate stand alone acct to trade Futures. The minimum Futures acct with TS is $5,000. So if you wanted to trade both, with the minimum, you will need $10,000.

 

This is my understanding.

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baseballeyeq    10

baseballeyeq
Posted

So the "T3" rule does not apply to daytraders with $25,000/$30,000 in their account. Therefore daytraders with that balance are able to trade an umlimited number of times during a day without being subject to any "3 day" settlement restrictions. Correct?

 

Thanks for the reply.

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