Each day-trading account is required to meet the minimum equity requirement independently, using only the financial resources available in the account. What happens if the equity in my account falls below the minimum equity requirement?
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I'm always flat at the end of the day. Why do I have to fund my account at all? Why can't I just trade stocks, have the brokerage firm mail me a check for my profits or, if I lose money, I'll mail the firm a check for my losses? It is saying you should be able to trade solely on the firm's money without putting up any of your own funds. This type of activity is prohibited, as it would put your firm and indeed the U. The money must be in the brokerage account because that is where the trading and risk is occurring.
These funds are required to support the risks associated with day-trading activities. You can trade up to four times your maintenance margin excess as of the close of business of the previous day.
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You should contact your brokerage firm to obtain more information on whether it imposes more stringent margin requirements. If you exceed your day-trading buying power limitations, your brokerage firm will issue a day-trading margin call to you.
Until the margin call is met, your day-trading account will be restricted to day-trading buying power of only two times maintenance margin excess based on your daily total trading commitment. Day trading in a cash account is generally prohibited.
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Day trades can occur in a cash account only to the extent the trades do not violate the free-riding prohibition of Federal Reserve Board's Regulation T. In general, failing to pay for a security before you sell the security in a cash account violates the free-riding prohibition. If you free-ride, your broker is required to place a day freeze on the account. No, the rule applies to all day trades, whether you use leverage margin or not. For example, many options contracts require that you pay for the option in full. As such, there is no leverage used to purchase the options.
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Nonetheless, if you engage in numerous options transactions during the day you are still subject to intra-day risk. You may not be able to realize the profit on the transaction that you had hoped for and may indeed incur substantial loss due to a pattern of day-trading options. Again, the day-trading margin rule is designed to require that funds be in the account where the trading and risk is occurring. Can I withdraw funds that I use to meet the minimum equity requirement or day-trading margin call immediately after they are deposited?
No, any funds used to meet the day-trading minimum equity requirement or to meet any day-trading margin calls must remain in your account for two business days following the close of business on any day when the deposit is required. Learn more about our updates. Give Us Feedback. Create your own user feedback survey. Frequently Asked Questions Why the change? Were investors given an opportunity to comment on the rules? Definitions What is a day trade? Does the rule affect short sales? Does the rule apply to day-trading options? The day-trading margin rule applies to day trading in any security, including options.
What is a pattern day trader? Day-Trading Minimum Equity Requirement What is the minimum equity requirement for a pattern day trader? Can I cross-guarantee my accounts to meet the minimum equity requirement? An auto trader is the person who performs auto-trading, which stands for automated trading and the use of computer programs and other tools to enter trading orders. A person that insists on being actively involved in a group conversation but is incapable of saying anything that adds any value. The guy everyone wishes would just shut up and leave, because what they're talking about is actually interesting, and the constant "that's what she said"s stopped being funny about 12 minutes ago.
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