Etrade Question: pattern day trading and margin account?
August 5th, 2010
Hi, correct me if I’m wrong Please
1. pattern day trading is if I buy and sell stocks from the same or different companies the same day and it could be a number of times a day for the five business days as long as its 4 times or more in five business days. In other words, I could buy and sell 10 times a day for five days of the week, is that what pattern day trader is?
2. I need to have at least $25000 on my account to do pattern day trading wether i have a margin account or not?
3. If I have a margin account, I can only borrow as much as I have, say I have $4000, then I can only borrow $4000 to trade
4. If I don’t have at least $25000 then I can buy and sell the next day as long as I want and not the same day
5. If I have a margin account, I can buy to day and sell the next day and re invest even before the money is settled since I have margin capabilities?
THANK YOU.
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Categories: pattern day trading
1. Pattern day trader: You make 4 or more day trades in any 5 consecutive business days. How those trades are spaced within the 5 days doesn’t matter. A day trade means you open and close a position the same day.
2. Once labeled a pattern day trader, you must have a margin account. And maintain a minimum equity balance of $25,000.00 on any day you day trade.
3. The normal margin account is 2 to 1. Once your account is classified as a day trading account, you are eligible for a 4 to 1 margin. Meaning with $25,000 in cash, your buying power would be $100,000. Most brokers will approve the 4 to 1 margin.
4. Yes. If you buy today and sell tomorrow that is not a day trade.
5. Yes. It still takes 3 days for the trade to settle, but in a margin account that happens behind the scene and does not effect your trading cash.
Yes, except (4) to buy and sell the next day and buy again, you still need a margin account as trades don’t clear for 3 days. i guess you understand that in 5