Day Trading Rules [Archive]

JTH

02-27-2009, 07:31 PM

I'm a little confused/worried about the day trading rules and how to avoid being labeled as a day trader.

Am I supposed to avoid 4 transactions with the same stock in 5 days?

etftalk

02-27-2009, 07:37 PM

http://www.daytradingworld.com/day_trading_rules.html

"Beginning September 28, 2001 margin rules and requirements for one group of traders changed dramatically. The new rules apply to traders categorized as Pattern Day Traders (PDTs) who are defined as traders who make 4 or more day trades within a 5 day period, unless his/her day-trading activities do not exceed 6% of his/her total trading activity for that time period. Thus, if you have only 4 daytrades in a 5 day period but have done more than 67 trades during that time, then less than 6% or the trades were day trades and hence do not categorize a trader as a PDT..."

XL-entLady

03-02-2009, 05:34 PM

So thinking about the day trade rules again. What happens if you sell, for example TZA but then buy TWM? Not the same EFT even though investing int he same idea. Is it still counted as a day trade?

Lady

etftalk

03-02-2009, 05:54 PM

I would guess no. It would not be a day trade.

JTH

03-02-2009, 05:55 PM

Yes Lady, I'm still confused.

Example: I Buy SLV on Mon, and I sell it on Tue, does this count?

Example: I Buy 500 shares of SLV on Mon and sell 100 shares on MON, Tue, WED, THU, & FRI. Does this count against me?

Example: I buy 500 shares of SLV on Monday and sell 100 shares every hour. Have I now excedded my limit?

I hate math, espically work problems...:huh:

XL-entLady

03-02-2009, 05:59 PM

The logical answer is that if you both buy and sell the exact same ETF in the same trading day, then it counts. But 'logical' may not be the same as the 'correct' answer in this case. :unsure:

Lady

etftalk

03-02-2009, 06:09 PM

Example: I Buy SLV on Mon, and I sell it on Tue, does this count?
I would have to say no.

Example: I Buy 500 shares of SLV on Mon and sell 100 shares on MON, Tue, WED, THU, & FRI. Does this count against me?

I would guess this counts as one day trade.

JTH

03-02-2009, 06:30 PM

I was on the phone this weekend with my USAA broker because they have been over charging me on my trades.

Anyways, he told me that if you buy one stock and sell it multiple times that day, then each one of those trades counts against you.

Does this jive?

etftalk

03-02-2009, 06:41 PM

I haven't found the answer to that specific question, but here are the rules per FINRA (Financial Industry Regulatory Authority)...

http://www.finra.org/Investors/SmartInvesting/AdvancedInvesting/DayTrading/p005906

XL-entLady

03-02-2009, 08:38 PM

More on the day-trade rule. I called my Scottrade broker to ask about linking my and my spouse's accounts, and asked about day-trade rules while I had him on the phone. He says the day-trade rule applies to margin accounts. But if you're trading an IRA account, which I am, then it is a cash account and isn't subject to that rule. All the cash account has to keep in mind is the settled/unsettled funds issue.

Lady

JTH

03-02-2009, 09:57 PM

But if you're trading an IRA account, which I am, then it is a cash account and isn't subject to that rule. All the cash account has to keep in mind is the settled/unsettled funds issue.

Lady

Thank you Lady, that makes me feel better and gives me one less thing to worry about. :)