quote:

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First, the proposed rule change would amend the definition of "pattern day trader" to cover only true day traders. Day-trading margin requirements should be imposed only on true day traders, not just incidental or occasional day traders. NASD Regulation believes that the current definition is too broad because it includes customers, such as institutions and other large individual accounts, that have a high volume of trading activity and that occasionally day trade, not as a strategy, but in response to a specific investment decision or in reaction to events. Accordingly, under the proposal day traders would be defined as those customers who day trade four or more times in five business days, unless their day-trading activities do not exceed 6% of their total trading activity for that period.

Additionally, the proposal requires a firm that knows or has a reasonable basis to believe that the customer is a pattern day trader, to designate the customer as a pattern day trader immediately, instead of delaying such determination for five business days. A firm would have a reasonable basis for believing that a customer is a pattern day trader if, for example, the firm provided training to the customer on day trading in anticipation of the customer opening an account. If a pattern day trader does not day trade for a 90-day period, he or she will no longer be considered a pattern day trader.

Second, the proposed rule change would revise the minimum equity requirement. NASD Regulation believes that the current minimum equity requirement of $2,000 does not sufficiently prevent day traders from continuing to generate losses in their accounts, without any additional deposit of funds. Accordingly, the proposed rule change would require a day trader to have $25,000 of minimum equity in his or her account on any day in which the customer day trades. This minimum equity must remain in the account for at least two subsequent business days following the close of business on any day the deposit was required. NASD Regulation believes that a minimum requirement of $25,000 would more appropriately address the additional risks inherent in leveraged day-trading activities and would better ensure that customers cover any loss incurred in the account from the previous day prior to day trading.

Third, the proposed rule change would permit day-trading buying power of up to four times the day trader's maintenance margin excess. NASD Regulation believes that current day-trading margin calls represent illusory liabilities because the funds used to meet a call are deposited after the day-trading risk has already been incurred and need only remain in the account overnight. Accordingly, the proposal would not permit day-trading buying power to exceed four times the day trader's maintenance margin excess. This calculation would be based on equity maintained in the account prior to each day's trading and, at the firm's option, could be based either on the largest open position at any time during the day or the customer's total trading commitment during the day. By limiting a customer's day-trading buying power to four times maintenance margin excess and requiring that amount to be in the account prior to day trading, NASD Regulation believes that the intra-day risks to firms caused by customer day trading would be more appropriately addressed.

Fourth, the proposed rule change would impose a day-trading margin call if day-trading buying power was exceeded. Under the proposal, if a day-trading customer exceeded his or her day-trading buying power limitations, additional restrictions would be imposed on the day trader to protect the firm from the additional risk and help prevent the recurrence of such prohibited conduct. The proposal requires member firms to issue a day-trading margin call to day traders that exceed their day-trading buying power. Customers would have five business days to deposit funds to meet this day-trading margin call. Funds used to meet a day-trading margin call would be required to remain in the account for two business days. Until the call is met, the day-trading account would be restricted to day-trading buying power of two times the maintenance margin excess based on the customer's daily total trading commitment. If the day-trading margin call is not met by the fifth business day, the account would be further restricted to trading only on a cash available basis for 90 days or until the call is met.

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http://www.sec.gov/rules/sro/nd0003n.htm
 

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Posted by lucid on :
 
Thanks for that.

BuyTex, are you saying that most people who day trade don't get flagged? Or do you just not know of anyone who has?
 

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Posted by BuyTex on :
 
at this level? most--not all--will run into "free-ride" trigger before they'll day-trade at a level to garner concern.

True day traders have their 25k accounts and don't worry about it.

Judging from past responses on these questions, some brokers are more lenient (or don't bother) at the levels of trading typically found here...
 

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Posted by lucid on :
 
So you mean that for most people, the amount of $ they're throwing around doesn't warrant action on behalf of the brokers? A kind of 'I don't want to deal with the small fry' mentality?
 

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Posted by Machiavelli on :
 
build up your account slowly up to $25K and you won't have to worry about anything.. though i don't recommend Daytrading for anyone.. i always recommend swing or position trading...
 

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Posted by lucid on :
 
Swing or position?
 

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Posted by BuyTex on :
 
http://www.traderstatus.com/swing.htm
 

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Posted by lucid on :
 
Thanks... haven't been doing much daytrading. Mostly swing and position now that I know what the terms are!
 

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Posted by BuyTex on :
 
you are very welome

keep us updated on how you're doing...

good luck
 

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Posted by coolnwo on :
 
Have 2-3 Accounts
Choicetrade
Firsttrade
Ameritrade

Then you have 9 day trades.
 

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Posted by lucid on :
 
ahhhh haha good idea with the several accounts!

BuyTex... up 17% for the year so far. Just started getting into the pennies and that's where i've made the bulk of that.
 

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Posted by BuyTex on :
 
ya, more than one account is the way to go... thought I made that clear...

Good for you, lucid!

keep us posted...
 

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Posted by lucid on :
 
24.5%
 

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Posted by tongusc on :
 
are u using scottade?
basically it means you can only trade on the same stocks three times in a day and then you have to wait 5 days to sell it.

example you bought it in the moring sold it 10 mins later and then in the afternoon you bought it again then you can't do anything untill 5 days later..

hope it help
 

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Posted by bonafide_trader on :
 
yea i do have scottrade

thanks everyone for the replies
 

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Posted by BuyTex on :
 

quote:

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Originally posted by tongusc:
are u using scottade?
basically it means you can only trade on the same stocks three times in a day and then you have to wait 5 days to sell it.

example you bought it in the moring sold it 10 mins later and then in the afternoon you bought it again then you can't do anything untill 5 days later..

hope it help

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quote:

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example you bought it in the moring sold it 10 mins later and then in the afternoon you bought it again then you can't do anything untill 5 days later..

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