This popped up in my alerts on Scottrade this morning... From what I understand, I am required to maintain a 25,000 balance or suffer restrictions... Does any one know the restrictions and/or consequences of getting flagged as this?

The 4 trades in 5 days is correct... I am just not sure about the consequences.

Is that 4 day trades every day, or 4 day trades over a 5 day period?

4 trades over a 5 day period.

~egon

It's 4 trades in 5 days of buying and selling a stock in the same day. In other words, if you bought HEB and sold it in the same day. Do that 4 times in 5 days and you are flagged as a daytrader.

try calling them up and explaining you weren't aware. sometimes your provider can be nice and unflag you one time. zecco did this for me once.

They can freeze you from trading for a period (I forget, it is either 30, 60, or 90 days). The reason is that you are getting a "free ride" on the trades because you are buying/selling with unsettled funds. That said, it is not a big deal being "flagged." Just watch your settlement dates or apply for margin (the margin will cover the unsettled funds float).

A margin account will not prevent you from being flagged.

There is a loophole in which a cash account can't be termed a PDT.

If your account has been flagged, you are required to deposit $25K. If you don't make the deposit, you can only close positions for 90 days. However, you can call your brokerage, and they will usually give you a one time break.

"The rules adopt a new term "pattern day trader," which includes any margin customer that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period."

A couple of more links/images that I found:









[This message has been edited by StupidisMe (edited 6/22/2009 1:29p).]

So...if its not a margin account you won't be flagged? Say an IRA account?

Or what if you do 3 day trades a week indefinitely...do they not care as long as you don't cross the 4/week threshold?

I use TDA

SJE,

3 trades a week indefinetly is kosher.

Cash accounts are not bound by PDT. However you still have to follow regulation T (wait 3 days for funds to settle, no free rides)