Day Trading And T3 Settlement
I have done some research on Day Trading And T3 Settlement, but seem to be getting conflicting answers. How do you day trade when 3 day settlement exists. To make my question clear, I will give two hypothetical examples.
1. You have $30,000(above the 25k minimum). You want to use all $30,000 in every trade that you enter(again hypothetical). Can you flip this 30,000 as many times as you want in a day? Buy, Sell, Buy, Sell, Buy, Sell in a day
2. You have $5,000 but you are in a margin account and have a buying power of $10,000. Can you flip this 10,000 as much as you want with OVERNIGHT trades? Buy first day, Sell Second Day, Buy Second Day, Sell Third day, ect... Or is this freeriding, even though you are in a margin account?
Thanks.
In your first example you are fine.
In example two it gets a little more complicated for a couple reasons. One being that some brokers don't let you trade using unsettled cash, your margin and buying varies from broker to broker. But the rule is FINRA rule says that you can not make more than FOUR day trades in a 5 business day period, not 5 market days(holidays make a difference)
Example:
Monday - buy x sell x Tuesday - bux y sell y Thursday - buy a buy b sell a sell b
You are now done with day trades until the 5 day period is met.
Monday - buy x sell y Tuesday - sell x buy y Wednesday - buy a sell b Thursday - sell a buy a.
You can repeat the above process as long as you aren't trading with unsettle cash and your broker lets you.
The answer to question #1 is yes...
The answer to question #2 is you have to wait for the cash settle in three days after exiting the position.
It's that simple.
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