I would greatly appreciate any advice one has on the subject of Day
Trading. I'm 23, just out of college and I've been dabbling a bit
here and there in the market the last couple of years. I've usually
held long positions for a substantial time and sold accordingly when I
felt they've topped out. I have a cash account and never really
wished to apply for and open a margin account until recently. I have a
few questions. If I open a margin account with $5,000 and only execute
three day trades every seven business days, always buying and selling
no more than one stock within one trading session three business days
in a row and then not buying or selling anything for four business days
and then repeating that cycle for as long as I want, would I be
designated a pattern day trader and be forced to keep a minimum equity
of $25,000 in my margin account? From what I understand, according to
the NASD's guidelines, someone can only be designated a pattern day
trader if they execute four or more day trades within a
five-business-day period, or incur two unmet day trade calls within a
90-day period. That being the case I'm curious to know how my
aforementioned scenario would hold up to those guidelines.
I'm willing to go through all of this trouble just to be able day
trade three times a week because I have the vast majority of my profits
from my previous trades locked into solely paying off student loans;
therefore I only have $5,000 to begin with. If I had $25,000 or more
required for pattern day traders I'd just go ahead and trade every
day. A few more questions, and they I'll quit typing. When the NASD
states that someone will be designated a pattern day trader if they
execute four or more day trades within a five-business-day period what
exactly do they consider a trade? Does the buying and SELLING of a
stock constitute a day trade, or do they count just the buying as one
trade and the selling as another? So if I were to just buy 500 shares
of xyz corp. at $10 in pre-market and sell the 500 shares later in the
day at $11 is that considered one day trade or two, considering I
executed two actions, buying and selling. Another question, If I open
a margin account and never allow my margin equity to fall below 50% and
follow my previously mentioned plan of day trading three days in a row
out of a seven business day period always leaving four business days of
inactivity in between is there any way I could incur a margin call?
Also If I go by aforementioned plan and never overlap my trades, always
holding only one security at a time is there any way I could exceed my
day trading buying power and incur a day trade call?
My last question is why is day trading in a cash account generally
prohibited? Is there any way to day trade in an unrestricted cash
account without being charged with a good faith violation or a
freeriding violation? Is it possible to day trade in a cash account in
any way, or would I have to open a margin account?
Sorry for inundating everyone with so many questions but I'd greatly
appreciate any answers or advice anyone has. Thank you.
|
