Day Trading

I believe this literally means that if you buy and sell a stock during the same trading day 4 or more times over the course of 5 trading days, you'll get labeled a "pattern day trader," which means you'll have some restrictions placed on you by your broker.

So if you bought and sold 100 MSFT 4 times in 2 days, let's say (and if these 4 trades were more than 6% of your total trades during these 2 days–which is very likely), you'd get labeled a "pattern day trader."

I am a finance senior.

First there are two books you should read. Way better than textbooks. The first is called "the math behind wall street".

http://www.amazon.com/Math-Behind-Wall-Street-Market/dp/1568581602/ref=pd_bbs_sr_1/002-9307096-4545628?ie=UTF8&s=books&qid=1177570772&sr=8-1

Then read this one;

http://www.amazon.com/Investing-Dummies-Business-Personal-Finance/dp/0764599038/ref=pd_bbs_1/002-9307096-4545628?ie=UTF8&s=books&qid=1177570661&sr=8-1

If you want to jump into it right away, the University of Arizona has a lot of good materials online. The books are better, but here is the link;

http://www.studyfinance.com/

Read the books. Read the Wall Street Journal every day, highlight the terms you don't understand & look them up online. Google the term "_____ definition".

Finally play the fantasy stock market. It is a cheap way to learn.

Here is that link.

http://www.investopedia.com/

And the guide.

http://simulator.investopedia.com/stock/game/

Buy a Hewlett Packard financial calculator ($40 bucks), & READ THE MANUAL.

If you do this and like it, I'd recommend finance as a major. Although it is pretty intense.

Very cool that you want to learn.

Good luck

So you've been short term trading a highly speculative market and losing your pants. Now you want a risk free method to trade this market? Are you seeing an issue?

Definitions time folks:

Savings – reserve funds invested in a safe vehicle to protect ones assets and receive a small return in exchange for giving up current purchasing power.

Investing – putting capital at calculated risk in order to achieve higher returns.

Trading – Speculating on short term movements of securities prices, involves high levels of personal risks but provides benefits of providing extra liquidity & effecientacy to securities market.

Now professional traders, a) have the financial ability to withstand prolonged periods of losses, b) understand there is no "perfect" method, and c) even if they had found something even bordering on effective, wouldn't distribute it freely as it would dilute the efficacy of their method (And with the current state of the mortgage markets we're learning just how falliable even those "propietary" methods can be).

Sounds like you need to back up. Start building your savings, then your investments. After that, if you must, you can start a trading account. But, honestly I've made far more in two years of investing, than I did in 10 years of trading. (Simple math lesson one, if a stock drops 50%, from that point it has to go up 100% for you to break even — meaning minimize your loses is more vital than maximizing your gains).

You will have to hold for at least three days, or at least hold onto the cash proceeds from any trade for three days. It takes that long for a trade to clear, unless you are approved for day trading, in which case you do need a minimum account of $25,000. For instance, you could buy a stock and sell it the same day, but if you used the cash proceeds to buy another stock, you would be required to hold that stock for three days before selling it.

While your example does not meet the definition of "pattern day trader" you may run into a "free ride" problem depending upon how much settled cash or margin you have when the trades were made.

For example if it was a cash account and you spent it all on the 3 buys Mon and used the proceeds of Tue sale to buy on Wed, you may not be able to sell the Wed buy until the following Monday unless you had enough already settled cash to cover the Wed buy. That might put a damper on your Fri day trade depending upon how much settled cash you had then beyond the Wed buy.

Although, if you had enough cash going into the week for both Mon and Wed buys, you may be able to use the proceeds from Tue sale for Fri trades.

So if you want to make a quick trade in less than 3 days, you have to make sure that you have the margin or settled cash to cover that buy before you would want to sell. So besides the amount available to purchase securities (which might not be settled yet), you have to be aware of what is actually settled when, or day trade buying power.

An action that attempts to inflate transaction volumes through the continuous and frequent purchase and sale of a particular security, commodity or asset. Round-trip trading can be used to refer to the practice of a business selling an unused asset to another company while agreeing to buy back the same asset for about the same price (which has been seen in the energy and telecom business).

There are two criteria that must be met to be considered a pattern day trader.

1. Four (or more) day trades within five consecutive business days. A business day is any day the stock market is open. Weekends and holidays don't count. Think of this as a rolling five day period, each day starting a new five day period.

2. More than 6% of the total trades in that five day period are day trades. Examples:

If you make 100 trades, 6% of 100 is 6. So if you make four day trades, you did not meet that criteria, and are not a pattern day trade.

If you make 50 trades during that that 5 day period, 6% of 50 is three. So if four of those were day trades, you would be classified as a pattern day trader.

From a practical standpoint, unless you are an extremely active trader, it is very easy to exceed the 6% criteria. So the best thing to do is focus on the "four or more" unless you want that label.

Day traders, active traders and "scalpers are all lthe same type of trader. They have the knowledge AND money to buy and sell the same shares in the same company or many companies throughout the trading day.

Stock brokers are the folks who bring the BUlls [BUyers] and BEars [SEllers] together. By doing this they earn their fees and commissions.

A free site: http://investopedia.com . It’s recognized by Y! A as a "Featured Knowledge Partner".

As you are doing research about the investments you are interested in, sometimes you'll come across a financial or investment term you never heard before.. You can usually find excellent, easy-to-understand definitions of many financial and investment terms by going to Investopedia’s dictionary.

It probably won’t be long when you’ll feel you’re ready to invest your hard-earned money. Before taking that step, you really should do research about what you are investing in. It also has a free, paper trading platform. You can set up a virtual account and almost trade as though you were trading with real money.

http://finance.yahoo.com is also recognized by Y! A as a "Featured Knowledge Partner".

If you want examples:
A] Go to the yahoo finance site.
B] Under the "HOME" tab is a blank box. Begin typing the symbol or the company's name. As you are typing a drop down menu will appear with symbols.
C] When finished click on the "GET QUOTE" button. The quote for that stock should be displayed.
D] On the left side is a blue box. The 3rd line down is "Options". Click on that.

IF that company has options, the option chains will be displayed. Not all companies have options. In fact I don't think there are too many companies under $5 which have options.

Thanks for asking your Q! I enjoyed answering it!

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

First of all, a day trader is anyone who buys and sells the same stock on the same day…that's the definition…pure and simple.

As far as taxes, you will owe capital gains taxes in America if you are trading on an American stock exchange such as the Dow Jones or NASDAQ. It does not matter where you are located, you can invest from the North Pole…the IRS doesn't care. If you are investing from an American stock exchange, you owe taxes in America.

The opposite is also true. If you live in America and invest in foreign stocks, you will owe taxes in those countries. It is credited from your American tax liability since you already paid taxes on that gain. That is called a "foreign tax credit". It is common for overseas mutual funds to report "foreign taxes paid" on a yearly basis for this purpose.

The traditional definition of a day trader is one who has a 100% turnover rate each day. That means that he/she will buy and sell all shares of a stock before the trading day ends.

A swing trader is a person who holds onto shares for a couple days to a few months.

A position trader is one who can hold onto shares up to a year.

An investor is a traditional long term position holder buying and/or holding shares for several years.

All of the above people are investors more or less it is only that there time horizons are different. All types can make any of the plays/orders you mentioned but again their time horizons are different.
Also of course day and swing traders are almost always technicians i.e. they do no fundamental analysis simply because there is no time to do so. They rely on stock (price) charts looking for trends and indicators.

My $0.02