Does any know if we need to have minimum of $25K in account to u sethe 4:1 Day Trade Margin?
or
even if I have just minimum $2K I can still use 4:1 Margin?
or
even if I have just minimum $2K I can still use 4:1 Margin?
4-1 Intraday Margin Ratio
- Thread starter cutetrader
- Start date
Robert Morse
Sponsor
I'm not an expert on Reg-T margin. My expertise is more with PM. But with that said, this is my understanding:
Approved for Margin Account: 2X both DT and overnight
Approved for DT Margin account: 4X DT and 2X overnight
No, you can't be approved for DT margin with an account under $25K. Also, with under $25K, you are limited to the number of day-trades you can make over a period of time.
http://www.finra.org/investors/day-trading-margin-requirements-know-rules
Approved for Margin Account: 2X both DT and overnight
Approved for DT Margin account: 4X DT and 2X overnight
No, you can't be approved for DT margin with an account under $25K. Also, with under $25K, you are limited to the number of day-trades you can make over a period of time.
http://www.finra.org/investors/day-trading-margin-requirements-know-rules
Thanks Robert. Even I thought the same. From my understanding TradeStation and LightSpeed has various types of account but most other brokers just say Margin Account nothing specific to Day Trading.
Example - IB Just have Margin, Cash and PM Accounts
ETrade has Margin or Cash Acc
Options House has Margin or Cash Acc
Just going through the FAQ of the link below and they are fine with 4:1 Margin for just 10K
https://www.tc2000brokerage.com/pricing
Robert Morse
Sponsor
You will be limited to 3 day trades in five business days.
What is a pattern day trader?
You will be considered a pattern day trader if you trade four or more times in five business days and your day-trading activities are greater than six percent of your total trading activity for that same five-day period.
Robert Morse
Sponsor
TC2000 is a software company that is also a FINRA BD. They introduce to IB. Your account will be at IB under IB rules but TC2000 commission structure. We do the same thing with LiveVol X.
Pattern day trade for those who have difficulty understanding it:
Suppose you have $10000 in your account. You buy 100 shares of a stock at $100 which amounts to your account value. So far everything is OK.
After 2 hours the stock goes up to $102 and you want to sell it. You sell it and then you have $10200 in your account. There is a trick here. They money from selling your shares will settle in 3 business days. So far it is still OK.
Then after 10 minutes the stock drops to $100 again and you plan to buy the shares again. {It does not need to be the same stock. I am explaining it this way for simplicity}. You go ahead and buy 100 shares. Since your money from previous sell is not settled, your broker loans you money to do this trade. So far it is still OK.
Again after half an hour the stock goes up to $105 and you want to sell your shares again. For you it might be OK but you are violating a rule. The rule is that you can NOT sell your shares before paying your loan to the broker. Your broker will get his loan after 3 days when your first sell settles. You can keep the shares but you can not sell it.
The good thing is that you can still sell it but you have violated the rule once. This violation goes to a buffer and stays there for 5 business days. You cannot have 3 violations in 5 business days. After 5 business days, that violation goes out of buffer and you are cleared to do another violation
If your account has over 25K, this rule does not apply.
Suppose you have $10000 in your account. You buy 100 shares of a stock at $100 which amounts to your account value. So far everything is OK.
After 2 hours the stock goes up to $102 and you want to sell it. You sell it and then you have $10200 in your account. There is a trick here. They money from selling your shares will settle in 3 business days. So far it is still OK.
Then after 10 minutes the stock drops to $100 again and you plan to buy the shares again. {It does not need to be the same stock. I am explaining it this way for simplicity}. You go ahead and buy 100 shares. Since your money from previous sell is not settled, your broker loans you money to do this trade. So far it is still OK.
Again after half an hour the stock goes up to $105 and you want to sell your shares again. For you it might be OK but you are violating a rule. The rule is that you can NOT sell your shares before paying your loan to the broker. Your broker will get his loan after 3 days when your first sell settles. You can keep the shares but you can not sell it.
The good thing is that you can still sell it but you have violated the rule once. This violation goes to a buffer and stays there for 5 business days. You cannot have 3 violations in 5 business days. After 5 business days, that violation goes out of buffer and you are cleared to do another violation
If your account has over 25K, this rule does not apply.
Robert Morse
Sponsor
Pattern day trade for those who have difficulty understanding it:
Suppose you have $10000 in your account. You buy 100 shares of a stock at $100 which amounts to your account value. So far everything is OK.
After 2 hours the stock goes up to $102 and you want to sell it. You sell it and then you have $10200 in your account. There is a trick here. They money from selling your shares will settle in 3 business days. So far it is still OK.
Then after 10 minutes the stock drops to $100 again and you plan to buy the shares again. {It does not need to be the same stock. I am explaining it this way for simplicity}. You go ahead and buy 100 shares. Since your money from previous sell is not settled, your broker loans you money to do this trade. So far it is still OK.
Again after half an hour the stock goes up to $105 and you want to sell your shares again. For you it might be OK but you are violating a rule. The rule is that you can NOT sell your shares before paying your loan to the broker. Your broker will get his loan after 3 days when your first sell settles. You can keep the shares but you can not sell it.
The good thing is that you can still sell it but you have violated the rule once. This violation goes to a buffer and stays there for 5 business days. You cannot have 3 violations in 5 business days. After 5 business days, that violation goes out of buffer and you are cleared to do another violation
If your account has over 25K, this rule does not apply.
You description is more accurate for a Cash account. There is no borrowing of funds in a margin account from TD to SD if you hold no positions overnight.
Another issue that I would like and also warn all those who open an account with less than 25K is that mostly they fund their account because they really do not have more to fund over 25K. That is OK but their mentality is to double their money with like 15K in their account in 3 months. That is why they always use margin and trade high risk assets and most of them end up lose everything. Even 25K is the at the border, You account can go to 24999 with one trade and just losing on commission and then you would still have day trade issue.