Day Trading

Here's a few "tips" hardly any one will tell you:
#1 In your trading account: YOU MUST HAVE AT ALL TIMES AT LEAST $25,000 U.S.

This is cold, hard cash. This isn't one share of stock or anything resembling any kind of trade. This is cold, hard CASH!

Check with your broker: As soon as your account goes 1 cent below that amount, a completely different set of trading restrictions is imposed on the trader.

Among these is: NO more than 3 or 4 day trades in any rolling 5 day trading period.

When you have that $25,000 U.S., post another Q stating you have $25K and you're ready. THEN you should be ready for more info.

Thanks for asking your Q!

VTY,
Ron Berue
Yes, that is my real last name!

Occasional – Yes.
Routinely – No.

You can make periodic day trades in an IRA. But if you make four or more day trades within 5 consecutive business days, you will be classified as a "pattern day trader." That will require a margin account and $25k minimum balance. IRAs are not eligible for margin accounts. So using an IRA for day trading isn't realistic.

I have an account with Scottrade. The NASD defines a Pattern Day Trader as "any customer who executes four or more day trades within five business days, provided the number of day trades is more than 6% of the total trades in the account during that period". Scottrade must issue a day trading equity call in the amount of the deficiency below $25,000 equity. Scottrade may be forced to close your account, or revoke your margin privileges, if you do not meet this day trading equity call.

Even if you do not open a margin account, day trading in a cash account is generally prohibited. Day trades in a cash account can occur to the extent settled money is used and the trades do not violate the free-riding policy of the Federal Reserve Board governed under Regulation T.

Hope this answered your question.

Pattern daytrade applies to all accounts. If you have under $25k in your account you are prohibited from doing more than 3 daytrades per 5 day trading rolling period. If you make 4 daytrades in this period you will be red flagged as a patern daytrader and must bring your account to $25k within 5 days. If you don't then you will be restricted from opening new positions for 90 days or until your account meets $25k minimum balance whichever comes first.

It applies to all accounts even if you have more than $25k.
If your labeled a patern daytrader and lets say you don't make any daytrades for 2 months and your account falls below $25k. You will still be restricted from opening new positions until you bring it back to $25k. In other words to clear yourself of a patern daytrader designation you must not make any daytrades what so ever for 90 straight days.

Daytrading sounds glamorous but is high risk because you have to move large amounts fast to make a living, and it's easy to slip up if the market moves against you.

Swing trading is less demanding and as (if not more) profitable.

Patterned day trades as determined by the SEC is legal only if you have enough assets in the swing account.

I think 25,000. The reason is, it takes 3 days for a trade to settle. Though you are allowed to use the money from a sale, you are not suppose to sell any new stock purchased before the settlement of the previous sale,

The most important thing to look at is risk versus reward. It takes a lot of skill to be successful at day trading, and a lot of cash. According to SEC regulations, you must maintain an account balance (minimum equity level) of at least $25,000. However, you will only be classified as a day trader if you buy and sell (or sell short and buy to cover) the same security within one day, and do this four or more times over five days or less. This means that you can make a day trade (or two or three) and not have to worry about your account being frozen, but make a habit of it and you will see your account suspended for up to 90 days.
Besides account requirements, there's also taking into consideration commissions versus trade value. To buy and sell stock can cost anywhere from $10-$40 overall, so you should be expecting profit exceeding this before entering a trade, which means trade size is a key component. Average daily volume of a stock wil lgive you an idea of what you can expect to be able to buy or sell.
Utilizing different technical indicators such as stochastics, RSI, MACD, moving averages, and price change patterns could give insight into possible future price changes, but these are all speculative and should be used with caution. I would caution anyone who is a beginner trader/investor about day trading. For short term gains, it's better, and less risky, to find stocks about to increase over the next few days/weeks/months. You'll more than likely realize more gains at less of a risk. It's up to you to learn how to do this correctly, but it can be a much more reliable method of trading rather than day trading. Good luck!

The situation you describe is not "day trading."

According to the NYSE definition of "day trading" the sale of an existing position from the previous day is a liquidation. The repurchase of that position is the establishment of a new position. It is not subject to day trading margin requirements.

If you are using a cash account, settlement rules would still apply.

Nope, never heard of it till you mentioned it sorry.

"Only init 4 profit" seems like a nice person, and I have to say I love the name. I would like to add to what he said about the 3 day settlement period. You can buy and sell all you want as quickly as you want you just have to meet SEC requirnments. There are basically two laws that apply here, the settlement one and a day trading one. the settlement one has been covered by "only init 4 profit" and the daytrading one just states that no more than 3 day trades can be made within 4 business days. Now the law also says that you can have permission to get around them if you meet certain requirnments, they simply are to have a margin account type with a minimum of $25,000 in the account at all times. If it goes below 25,000 you have to stop making more than 3 trades within 4 busibness days untill it gose back over the 25,000 mark. also by having a margin account you never have to worry about the settlement dates no matter what the account value is.

Also if you are looking for an online broker, I use Scottrade, they are very cheep $7 trades for market and limit orders.

Hope this helps.