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Author Topic: daytrading rules
skip
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this may be a dumb question but how do you guys get around the "4 daytrades per rolling 5 day period" NASD Rule 2520? do you all have $25k margin accounts? i only do a few trades a week right now, but i want to start following the train and others with some daytrades. do i have to just start slow, and make my 25k so i can daytrade, or am i misinterpreting the rule here? thanks for your help.
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Ktrain420
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just use a cash account......u can trade as much as ya want.......just gotta wait for the funds to settle....3 day's........GL

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"IT'S NOT LUCK IT'S DAYTRADIN'"

"HERE'S MY 2 CENT'S, SEE IF YA CAN TURN IT INTO A BUCK"

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accesscard18
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skipdeez, check out abwatley.com....You can open a margin account with less than 25k and still day trade it.
For example,
if you open an account with 10k, you can trade 10k a day and have the fun available for you the next...

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TelnetManta
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Im new here, first post. I need to setup an account so I can start trading as well and i dont exactly understand the question above. If I set up an account with say scottrade.com will I be able to day trade?

Thanks for helping the new guy [Big Grin]

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Machiavelli
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EWWWWWWWWW not scottrade of all brokers... go with Choicetrade.com .... for daytrading you would need 25 K with any broker.. you can't daytrade with 10K day in and day out.. if you sell the stock you have to wait a day or two for the account to settle..

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Let the world change you... And you can change the world.

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trendtrader2004
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It seems to me that each broker interprets the daytrading rule differently. I read through it myself last year, and it only seemed to mention if you had a margin account that it you needed $25k, and I checked with a few brokers after that, and each one varied, some told me that if you are going to day trade, that you need $25k in your account with either margin, or a cash account, and others told me it was only necessary if you had a margin account.
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Machiavelli
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I only heard for margin account never for cash.. i mean you can have a 25K cash account but not for daytrading.. but i could be wrong <shrugs>

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Let the world change you... And you can change the world.

Ernesto "Che" Guevara de la Serna

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firebirdude
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Telnet, I emailed Scottrade and asked their "opinion" I how to get around the 3+ day settling period on my cash account. Their reply was:
quote
Thank you for your email. If you apply for "margin", you can get better trading rules. For example, you can do up to 3 daytrades in a 5 business day period. Print the "margin application" from the "forms center" section of the website. Fax/mail to your Scottrade branch office. It takes 2-3 business days to get approved. To do unlimited trading, you would need to have $25,000 equity in the account. Please feel free to email with further questions.
/quote

So, I think regardless of account balance in a cash account, you must wait the settling period. If you open a margin account you can do 3 "freerides" in 5 days. If you have $25k in a margin account, you are not restricted what so ever. Skip, don't think there is a way around it without the cash. Sorry. [Frown]

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glassman
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Scottrade follows the rules (in this anyway)

apparently not all brokers follow this rule....

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Don't envy the happiness of those who live in a fool's paradise.

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firebirdude
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Not to steal this topic or anything, I have a quick question.... Say I open a margin account with less then 25k. Buy and sell one stock on Monday. I will be allowed to buy and sell a different stock on Tuesday, but I'm I technically using a margin loan for this purchase? (Until Monday's funds settle) Will I be charged interest? Or do you truly get 3 "freerides" a week with a margin account? Should be exactly like a cash account except you can do 3 freerides, correct?
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Peaser
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Every time you use the margin, you pay an interest fee along with the borrowing. If your account can not cover the margin in case you lose money on the trade with the margin, then they will sell shares in your portfolio to cover the loss if you don't fund the loss shortly after.

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Buy Low. Sell High.

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firebirdude
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Just got a reply from Scottrade regarding my question:
"The second thing about buying and selling a stock on Monday and then using the proceeds to buy right away is that technically you are using Scottrade to purchase the stock because your funds are unsettled, however Scottrade does not charge interest for this type of borrowing because when the funds are settled you are not in a borrowing position anymore."

I don't have to take out an actual "loan". So the way I take it, it IS exactly like a cash account except I get 3 freerides per 5 days....

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T e x
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but you must hold the second stock till the funds settle--no good for a day play.

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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firebirdude
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quote:
Originally posted by BuyTex:
but you must hold the second stock till the funds settle--no good for a day play.

Really? Damn it. Can I live in the US and open an Ameritrade Canada account? LOL [Big Grin]
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firebirdude
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I guess the question I need answered is:

If I never exceed 3 roundtrips in 5 days AND never use a margin loan, it is entirely possible for me to trade strictly with my own cash and NEVER be charged a penny in interest. Correct? Yes? Or no?

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Ghosty
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ya
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stashu
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Ok, lets say I already own stock A (settled funds) in a non-margin account.
I sell stock A.
I can buy stock B (unsettled funds).
And I can sell stock B.
I just cannot buy stock C until the funds from the sale of stock A are settled.
Is this correct?
And would it make a difference if stock A,B, & C were all the same stock?

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firebirdude
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quote:
Originally posted by stashu:
Ok, lets say I already own stock A (settled funds) in a non-margin account.
I sell stock A.
I can buy stock B (unsettled funds).
And I can sell stock B.
I just cannot buy stock C until the funds from the sale of stock A are settled.
Is this correct?
And would it make a difference if stock A,B, & C were all the same stock?

On a cash account, you cannot SELL stock B until the funds from stock A are settled. That part I DO know... [Big Grin]
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lushka16
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Best way around NASD Rule 2520 is to divide your brokerage cash into 1/3. Use 1/3 day 1, 1/3 day 2, and 1/3 day 3. By Day 3, the first 1/3 should be settled, so you can have buying power every day.

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Long term investments are simply day trades that didn't work. (except QBID :P)

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Pagan
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Actually...the best way is to open a margin account...eliminates the 3 day settlement rule completely. Free-ride rule is still in effect if you maintain less than $25k in your account. If you are using margin just to eliminate settlement dates, there is no borrowing or interest involved.

Most brokerages only require $2k to open margin account.

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It is impossible to make anything foolproof because fools are so ingenious.

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T e x
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Two good answers above. For those with <$25k, partioning is a good workaround. A compromise to get going & build to $25k might be to trade only 3 days a week with risk capital, working for "money" the other four. eg, trade Tu-Th, wages Fr-Mn.

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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BullNuggets
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etrade sucks - i have to wait even longer and my bids are ignored.

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always do you DD, sleep is for sheep!!!!!

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skip
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thanks for all of the replies on this topic. I haven't been here in a while and was surprised, thanks! Looks like I need to raise $25k!
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TampaInvester
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another work around to daytrading rule is have accounts with 2 brokerages. I have choice trade and scottrade and now I can do 6 day tades in 10 day period. Technically this is still not allowed but there is no way to find out...
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MillerTIME
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interesting thing to keep in mind is that a daytrading buddy of mine trades from 3 accounts...1 of which is an ameritrade Canada Elite account...he is in a cash account and trades most of his money everyday...i mean he will buy and sell, buy and sell, buy and sell all of his portfolio in the same day!!!

ameritrade canada has yet to send him any letters or anything!!!no joke, he can daytrade or flip his whole account 3x+ in a day and get nothin!!he can use those funds immiedately once hes sold!!hahahha

just thought any of you canadians would like to know this...dont know if it is just his particular case, or for some reason ameritrade canada rarely checks peoples accounts???who knows, either way, hes gettin off easy so far!!!

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Buy the silence-Sell the noise
SFTV.004-.0075
AVNT.0018-.0033
FPPL.0034-.03
WEGI. My new Call

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bdgee
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MillerTIME,

If I understand things, those "daytrading" definitions and associated "rules" are set by US authorities and, so, have no effect on accounts in Canada or any country other than the US. Also, modulo my understanding, enforcement of and even interpretation of those rules is left to the brokers. There seems to be some limitation to allowing "non-Canadian" brokers providing accounts to Canadians or Canadian residents, but some US brokers can and in those cases, apparantly a person in Canada might choose to operate ether with a Canadian or a US account, but the broker, even for the US account my choose to ignore the US limitations on his daytrading.

Oopss, I think TampaInvester had a fat finger on the calculator in his post above. With two accounts, at 3 or less daytrades per account per 5 day period (to avoid the "pattern day trader" problem), you could manage 6 day trades per 5 day cycle.

In truth, I have two accounts (Lowtrades and Choicetrade) and more than once, in each account, I have cleary exceeded the allowed 3 "day trades" per 5 day period in less than 5 days and never have had any problem. Neither account holds $25K and both are cash accounts. The brokers keep a running total of my "available cash for buying" handy and all I do is stay within that amount.

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TampaInvester
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yes it should be 6 trades in a 5 day period.

Is it also possible that non US citizens residing outside US be able to open an account with a US brokerage (if that is even allowed) and not be affected by day trading rules. My fiance is european and was thinking of opening an account in her name and then be able to do unlimited day trading

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