Can somebody please explain how traders avoid stock trade settlement violations while scalp trading? For example, let’s say that I start the day with $100,000 in my account. During the 1st minute of trading I buy 1000 shares of ABC, Inc. at $100.00 per share. The 2nd minute I successfully sell all of those shares at $100.10 per share. The 3rd minute I then buy 1001 shares of XYZ, Inc. at $100.00 per share. The 4th minute I successfully sell all of those shares at $100.00 per share. I continue to keep up this type of trading all day. My understanding is that the sale of the XYZ, Inc. shares during the 4th minute would be a good-faith violation if I have a cash account because I sold those shares before they were fully funded. Therefore, I must use a margin account. But, I read that with a margin account I can only trade up to four times the amount in the account per day. Is that true? If so, then I would have to stop trading for the day after only a few trades. How do people avoid these limitations while scalp trading?
Cash account, you get to day trade the morning balance once, as you can't recycle your buying power. Margin accounts allow for leverage and recycling of buying power. The 2X for 4X is the leverage limit for DT but you can within that limit, buy and sell as much as you want.
With a 25k+ account as above 4:1 margin intraday 2:1 over night incase you hold, below you can’t buy and sell same day more than 3 times in a 5 day period might be 4 and 2:1 margin. Sub 25k go Futures, sub 2k go Forex.
Thanks to both of you for your replies. I think I understand now, but can somebody please confirm that this is correct: If I start the day with $25k in a margin account and we assume that stock prices aren’t changing for some odd reason, then I could (in theory) buy $100k worth of stock shares one second, sell all of those shares the next second, buy another $100k worth of shares the 3rd second, sell all those shares the 4th second, and repeat this all day. At the end of the day I would have to ensure that I don’t hold more than $50k worth of shares. I could then repeat this process every subsequent day. Is this correct?