Why brokers are tough to cash accounts ?

Quote from AlphaGeneration:

Here's the problem:

Assume you have $1 in your account. Your broker won't stop you from making any trades (i.e. if you decided to buy a stock worth $5 (assume no commission). This puts your account at $-4, which your broker won't stop you from doing.

Assume stock goes up to $6 that day. You then sell and make $1 profit. This is why it's a free ride and is not legal. You could technically use money you don't have to buy stock and make a profit.
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What if I don't borrow or cannot borrow any money because I am trading in my 401K account. I am using my own money and any time that I trade, I literally have money for that trade.
If the sell money settles after 3 days, they should take money for my buys after 3 days too. That will solve everything.!!
 
Quote from hajimow:

What if I don't borrow or cannot borrow any money because I am trading in my 401K account. I am using my own money and any time that I trade, I literally have money for that trade.
If the sell money settles after 3 days, they should take money for my buys after 3 days too. That will solve everything.!!
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Purchase/Sale are treated the same way in a CASH account, Proceeds are not available for T+3, why is this concept so difficult for you to grasp?
 
Quote from el pollo:

Purchase/Sale are treated the same way in a CASH account, Proceeds are not available for T+3, why is this concept so difficult for you to grasp?
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My question is "WHY it should be that way"

I have 50K in my account and I do the following trades. Tell me why I should be restricted. Don't tell yes you cannot. Explain the wise reason behind this rule.

I buy 50K worth of X at 10:00AM
I sell all my shares at 51K at 10:05AM
I buy 50K wirth of X again at 10:10AM
I sell all my shares at 51K at 10:15AM
I buy 50K wirth of X again at 10:20AM
I sell all my shares at 51K at 10:25AM
I buy 50K wirth of X again at 10:30AM
I sell all my shares at 51K at 10:35AM
..........................................................
..........................................................
again
again
again

Remember tell me why they are restricting me. Don't tell me the sell money is not settled. My point is I sold my stock NOW and I want the cash NOW.
 
Quote from hajimow:

My question is "WHY it should be that way"

I have 50K in my account and I do the following trades. Tell me why I should be restricted. Don't tell yes you cannot. Explain the wise reason behind this rule.

I buy 50K worth of X at 10:00AM
I sell all my shares at 51K at 10:05AM
I buy 50K wirth of X again at 10:10AM
I sell all my shares at 51K at 10:15AM
I buy 50K wirth of X again at 10:20AM
I sell all my shares at 51K at 10:25AM
I buy 50K wirth of X again at 10:30AM
I sell all my shares at 51K at 10:35AM
..........................................................
..........................................................
again
again
again

Remember tell me why they are restricting me. Don't tell me the sell money is not settled. My point is I sold my stock NOW and I want the cash NOW.
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hajimow you are mixing up selling and settling. In a cash account, sell transactions do not instantly settle. So, even though it seems you still have your 50k, the trade has not settled. The sell won't completely settle with the broker on the other end until three days later.
 
Quote from endsongs:

hajimow you are mixing up selling and settling. In a cash account, sell transactions do not instantly settle. So, even though it seems you still have your 50k, the trade has not settled. The sell won't completely settle with the broker on the other end until three days later.
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Thanks for all the responses. I really appreciate it. Maybe I don't explain the problem well. When you deposit a check into your account, it takes 3-5 business days to settle which I understand because the check may bounce back. But why my broker does not deposit the money into my account right away? That will be good for the broker because it will increase my activity and my broker will get more commission. I will stop repeating my question. I know what the broker is saying and what is the rule but what I don't understand is why it should be like that. I believe that rule should go away. Who am I sho says that:(
 
Quote from hajimow:

Thanks for all the responses. I really appreciate it. Maybe I don't explain the problem well. When you deposit a check into your account, it takes 3-5 business days to settle which I understand because the check may bounce back. But why my broker does not deposit the money into my account right away? That will be good for the broker because it will increase my activity and my broker will get more commission. I will stop repeating my question. I know what the broker is saying and what is the rule but what I don't understand is why it should be like that. I believe that rule should go away. Who am I sho says that:(
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I hear what you're saying. In Canada things are a little different. Same free-riding rule for cash accounts BUT you can daytrade in your RRSP (registered) accounts if you wish. And of course, no PDT rule.
 
Quote from el pollo:

More importantly, will you go away now?
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The difference between you and me is that you cannot think. If the SEC asks you after each trade, you should tun on/off your PC and then drink a glass of water and then scratch your butt to become eligible for the next trade, you will do just that:p
 
Quote from l2tradr:

Did you call your broker and ask? What did they say?
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I called Fidelity and asked about the rule. The Fidelity rep said that rule does not make sense to him either but that is securities rule and they can not do anything about it.
 
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