Was looking at IB's site, thinking of opening a small account to try them out (and stream data to Wealth-Lab). Their definition of a daytrader is: "**You are considered to be day trading if you open and close three stock or stock option transactions within a five business day period." I thought a "day trade" meant you open and closed on the same day. Have they bastardized the free-riding rule into this definition? Would this describe a "week trade"? Is this a new rule or just IB's rule? Thanks in advance, smitty
NASD Rule 2360(e) (e) For purposes of this rule, the term "day-trading strategy" means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities. Terra Nova: Day Trading - Refers to establishing and liquidating the same position or positions within one day's trading. eTrade: Day trading is the practice of opening and closing a position (i.e., buying and selling a stock) on the same day. A same-day buy and sell, or a same-day sell short and buy to cover, is considered a day trade. If you make four or more such trades in a five-business-day period, you'll be considered a pattern day trader under NASD Rule 2520. Ameritrade: Day Trade - The buying and selling of the same security on the same day. CyberTrader: A day trade is the purchase and sale or sale and purchase of the same security on the same day in a single account. Liquidation of overnight positions and repurchase (or sale) will no longer be considered a Day Trade. Penson will look at the number of âOpeningâ transactions to determine the number of day trades in an account. TradeStation Securities: Pattern Day Trading Accounts: Based on NASD and NYSE day trading rules, any account that places 4 day-trades in a 5 trading day period is permanently deemed to be a âPattern Day Tradingâ account. Pattern Day Trading Accounts must maintain a minimum daily equity balance of US $25,000. If the account balance falls below $25,000, trading is restricted to closing transactions only until the account balance is increased to $25,000. Guess I'll just stream Ameritrade data through QuoteTracker...
Don't see how I've done that... NASD says a day trade is still a "day" trade (buy & sell or short & cover on same day). IB says "**You are considered to be day trading if you open and close three stock or stock option transactions within a five business day period." -no mention of these three trades each being completed in one day- By this definition, buy three stocks on Monday, sell them on Friday = day trading? I have opened and closed more than three stock transactions within five business days for the last two years... in an IRA account... at old stodgy eTrade! My system has a two day holding period and kicks out about six trades a week on average. Seems strange that there's more freedom in an eTrade IRA account than there is in an IB margin account, doesn't it?
What I meant is that the new definition is that of the PDT rule. Whether that rule applies to the IRA account or not, I'm not sure. It could be that it does but is not strictly policed in eTrade. Elsewhere, it's quite strict. Thus: <i>By this definition, buy three stocks on Monday, sell them on Friday = day trading?</i> is correct according to the new definition.
OK, I understand now... sorry, a little slow. Thanks for replying, it's been awhile since I've researched this stuff. Is this new interpretation driven by the NASD/SEC or is it just a broker thing? I remember laughing at all those conspiracy theories about PDT, but if they're out for small swing traders too, I gotta wonder... smitty
If I remember correctly, it's SEC driven - those PDT conspiracy theory threads probably have more than enough info on this matter. It obviously couldn't be a broker thing b/c brokers stand to only lose.
I opened the link and made single day bold. IB seems to be like the others. Pattern Day Traders Criteria and Restrictions Customers who have made four or more securities day trades (open and close a stock or option position in a single day) within five business days are considered Pattern Day Traders. Pattern Day Traders are required to hold a minimum of $25,000 USD in equity (or USD equivalent), and therefore those customers without this minimum equity and who have completed three day trades within five business days will not be allowed to enter another trade. Once you are deemed a Pattern Day Trader you will not be allowed to make another securities trade until your equity is above $25,000 USD (or USD equivalent) or you notify Customer Service that you no longer intend to Pattern Day Trade and then standard stock margin requirements will apply. We will only take one request to change your Pattern Day Trader designation, and once the system re-designates you as a Pattern Day Trader for four or more securities day trades, your account must have more than $25,000 USD in equity to trade again. Customers who are never designated as Pattern Day Traders are subject to standard stock margin requirements Michael B.
The confusion started here: http://www.interactivebrokers.com/index.html?html/generalAccount/tradingPermissions.html~top.body Under "Stocks/Margin" there's a reference to the quote at the bottom of the page (**). Is the page hosed up? Did they forget to use the word "day" when refering to the 3 trade limit? Thanks, smitty