Pattern Day Trader

D

DWV

I trade futures so I'm not well versed on the topic of equity day trading. I have heard of traders using 4:1 margin when they are deemed to be "pattern day traders". Is this so they can trade 100% of their cash each day and not have an issue with the T +3 day settlement rule? So a trader with $100k cash would have $400k day trading buying power - he could day trade with $100k each day without a margin/settlement issue?

Thanks.
 
You have to have a min of $25K and you get 4x margin which you can trade all the live long day as long as you're flat at the end of it all (or at least flat enough to cover the additional margin that's intraday only).

And you can trade as many stocks as you want intraday without the 3-day settlement issue.
 
Thanks - so does that mean you can trade each day with the full 4:1 margin? So that $25k account would be able to trade $100k each day of the week without the 3 day settlement issue?
 
Yes, I was told that the 4x margin was available to buy and sell as many times during the day as you want, and Etrade told me no margin interest is charged either.
 
Quote from NoDoji:

Yes, I was told that the 4x margin was available to buy and sell as many times during the day as you want, and Etrade told me no margin interest is charged either.
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In regards to the three day settlement rule; if you traded and closed flat each day and then decided to withdraw or pull funds, your broker would probably hold majority of funds until the 3 day is settled; at least that was the way my broker operated.
 
Just to clarify the buying power... Say I executed a trade with full buying power with 25k in my account, so I buy 100k worth of shares and sell it back. Can I make the same trade again (even multiple times) with full buying power as much as I'd like within the same day?
 
Quote from gelidstar:

Just to clarify the buying power... Say I executed a trade with full buying power with 25k in my account, so I buy 100k worth of shares and sell it back. Can I make the same trade again (even multiple times) with full buying power as much as I'd like within the same day?
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In my experience, no. You'd get 100K BP for the day. This probably depends on the individual broker, although it is my understanding, only prop traders get immediate credit. Applies to equities, not futures. Not sure about debt instruments.
 
Quote from gelidstar:

Just to clarify the buying power... Say I executed a trade with full buying power with 25k in my account, so I buy 100k worth of shares and sell it back. Can I make the same trade again (even multiple times) with full buying power as much as I'd like within the same day?
More...

With E*Trade, if you are granted pattern day trader status, yes you can do that all day long as long as you're flat at the end of the day.
 
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