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Author Topic: DAYTRADING QUESTION!
BDUBS07
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I have heard of the the 4 round trip trades in 5 days you get flagged. I only want people that know what there talking about answer this question. Is it single day round trip trades or is it just 4 round trip trades in a five day span period. Any help would be much appreciated.
Posts: 204 | From: Marietta, GA, U.S | Registered: Apr 2004  |  IP: Logged | Report this post to a Moderator
daf22
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a single day
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WinsumLosesum
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From Ameritrade

The Securities Exchange Commission (SEC) and National Association of Securities Dealers (NASD) require all NASD affiliated broker-dealers to be compliant with the revised NASD Rule 2520. This rule states that a day trader is any client who executes 4 or more day trades within 5 business days, provided the number of day trades represent at least 6% of the total trading activity during the 5 day period.


A day trade will consist of purchasing and selling or selling and purchasing the same security in the same day within a margin account. Long securities held overnight and sold the next day prior to the purchase of the same security, or a short security position held overnight and purchased the next day prior to a new sale or purchase of the same security are not considered a day trade. Buys and sells within the pre-market or extended-hours session will be tracked and considered when determining day trading activity for that day.
________________
So you could make 3 day trades in one day, but you'd have to not day trade for the next 4 business days.


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BDUBS07
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Thanks for clearing that up for me.


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chshore
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What happens if you get flagged as a day-trader?
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i'm all in
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90 day suspension


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WinsumLosesum
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quote:
Originally posted by chshore:
What happens if you get flagged as a day-trader?

I think if you just trade with cash, you can trade as much as you want, with no consequences.

From Ameritrade:

Effective September 28, 2001, the NASD enacted changes to day trading margin requirements, which may affect your account.

The NASD provides that a pattern day trader is any account that executes four or more round-trip day trades within any rolling five-business-day period, provided the number of day trades represents at least 6% of the total trading activity during the same five-business-day period. Day trading is the practice of purchasing and selling, or short selling and purchasing to cover, the same security in the same trading day within a margin account.


If activity in your account is classified as "pattern day trading," you may be subject to the following restrictions:

Minimum Equity Requirement - A pattern day trader's account must maintain a minimum equity of $25,000 at the start of any day in which day trading occurs. Pattern day trader accounts that fall below the $25,000 minimum equity requirement should consider limiting day trading activities to cash-only transactions until the minimum equity amount is reached in order to avoid a day trading buying power call.

Day Trading Buying Power - Day trading buying power is equal to the equity in your account at the close of business the previous day, less the Self-Regulatory Organization (SRO) requirements, multiplied by up to four. Accounts that are engaged in day trading activities should consider being limited to day trading buying power.

Day Trading Minimum Equity Call - If your account has less than $25,000 equity and is identified as a pattern day trading account, a day trading minimum equity call will be issued. Pattern day trader accounts that fall below the $25,000 minimum equity requirement should consider limiting day trading activities to cash-only transactions until the minimum equity amount is reached in order to avoid a day trading buying power call. Funds deposited in an account to satisfy a day trading minimum equity call are subject to our ten-business-day hold policy with the exception of wires, which must remain in the account for two business days.

Day Trading Buying Power Call - If your account meets the minimum equity requirements for day trading and exceeds the day trading buying power at any time throughout the day, a day trading buying power call is issued. Once a day trading buying power call is issued, the day trading buying power is restricted to two times SRO excess for five business days unless the call is met earlier. If the day trading buying power call is not met within five business days, the account will be permitted to execute transactions only on a cash-available basis for 90 days, or until the call is met. Multiple day trading buying power violations may result in a restriction limiting transactions to a cash-available basis as well. Day trading calls can only be met by depositing cash or fully paid-for securities, by selling non-marginable securities, or selling long options held in the account. Funds deposited in an account to satisfy a day trading buying power call are subject to our ten-business-day hold policy with the exception of wires, which must remain in the account for two business days.

Regulation T Restricted accounts - Pattern day trader accounts that are under a Regulation T restriction will have their day trading buying power limited in the following manner:

* If the account meets the $25,000 minimum equity requirement, they will receive the lesser of SMA times two or SRO excess times four. Closing day trade transactions will still replenish day trading buying power.
* If the account does not meet the $25,000 equity requirement, it will receive the lesser of SMA times two or SRO excess times four. Closing transactions will not replenish day trading buying power


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Bob-on-the-golf-course
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I'll try to add some comments in the English language. First of all, you would be considered a "pattern" day trader (if you meet the 4 round-trip in a day requirement in any given 5 day period).

Second, there is no "penalty" for being a pattern day trader. It means that your broker (Ameritrade, etc) will now establish an amount that you can day trade with if you are tapping into your margin account. (This amount called 'Day Trading Buying Power', if you use Ameritrade, is set by regulation.)

Without describing all the penalties, if you trade only with your cash balance, you can do all the trading your little heart desires. But if you trade with your margin account over your day trading limit, you'll be facing penalties that will basically limit your trading.

It is very complicated and even if you read the handbook you will not understand it all, but I hope for your best.

Bob


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keithsan
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FREEZE!

I am a flagged pattern day trader. There are no fines, nothing. You can not use margin if you do not have the 25000 in your account.

Only cash can be used in non marginable securities. I tried avoiding this label but have it and it has been no problem except that now and then i would miss calculate a quick trade and it would dip into my margin account. I can no longer do that.

REALLY NO BIG DEAL!

Keith


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