Thanks. I emailed the SEC for clarification. I seems like I have been trading at will (multiple trades intraday as well as holding overnight) with zero problems and suddenly I am reduced to 'counting days' before I can buy something. It is shocking and totally confusing.
I know I'm a bit paranoid however I swear brokers used the rules when they can profit....there is some leeway if "THEY" want to give it to you. These "rules" supposedly put in place to "protect" the retail trader totally suck in practice. Sorry for your pain. One of the reasons I switched to futures as Badnewsber pointed out...but you know eventually they will manage to F that for us as well.
Let me explain it to you in plain words what has happened in your situation. It has happened to me many times before and it was hard for me to digest it because I believe it is a stupid rule but it is what it is. Lets say you have $10000 cash in your account and have no position and lets assume that commission is zero to make it simpler. On Monday you buy 100 shares of stock which is $100 per share you buy $10000 worth of stock. That transaction goes well. Either that day or a month later, (does not matter when), the stock goes to $110 and you sell your shares so your account should have $11000. That money will be settled in your account in 3 business days (pay attention). Just 2 hours after you sold the stock drops to $100 and then you decide to buy back 100 shares so you put the order. Your order goes through. In the second trade the broker lends you money to buy the shares because you still don't have money(remember your money will be available after 3 business days) so in the second trade you are using your broker's money because he is trusting you (hahaha). Now the rule is that you cannot sell your second trade's position before paying the money that you borrowed from your broker. This situation does not happen in real life (non stock related stuff). The person who lends you money should be happy if you sell your item and pay him back but not in the stock market. Please let me know if it sinks now. If you sell your second trade, that would be OK but you have done a day trade and you cannot do 3 day trades in 3 business days.
According to you one can't buy and sell stocks in cash ( not margin) account unless he has cash available to do so. Meaning at least 50% of the account should be in cash to buy new stock. That does not seem right. Besides I buy new stocks all the time in my margin account immediately after selling old positions and I never pay margin fees.
I did not say that. I did not say that either. Yes you can do that and I never mentioned that you cannot trade in margin and don't pay margin (if you don't carry it over night. Conclusion: You misunderstood me and were talking on totally different subject.
That's what you said: In the second trade the broker lends you money to buy the shares because you still don't have money(remember your money will be available after 3 business days) so in the second trade you are using your broker's money because he is trusting you (hahaha). Shouldn't that mean that if you have 0 cash in your cash account then after you sell position you can open new position only after 3 days when the cash settles?
Some brokers calculate your daily buying power based on your holdings at the end of the previous day, and if you sell any stock during the day it will not increase this buying power (you will see the increased buying power on the next day). Similar restrictions can be imposed on your account if you ever got a "daytrading margin call" and didn't deposit the required amount of additional funds in the time required.