To make this as short as I can here is the Issue at hand: I opened a cash account with IB on mon. and after 3 (round trip)trades IB informs me that I cannot trade again for 3 days. Why 3 days u ask? Well according to IB the trades have not setlled yet, and until they do settle the cash is not available to me to make trades with. Now at this point I will take a deep breathe and calmly ask for feedback b/c it is possible that I do not see an angle here and IB is in fact dead on correct in this. ...(pigs may fly out of my ass 2) As i see it though this makes no friggin sense. Cause to the best of my understanding (i could be wrong) settlement date is merely the day on which by cash is required to settle the trade! (imagine that) now i may not be the greatest at logic but I will give it a shot: I buy 100 shares of a stock @ $40 =$4000 and i sell the 100 @ $39 =$3900 now my logic says that IB seeing that net I lost 100 dollars would then proceed to remove a 100$ from my account to cover the amount needed to settle the trade since (again MY logic) tells me that the shares i sold would cover the other $3900... or is there someone out there to who it makes sense to pay a man $4000 when he owes you $3900 ? Now to the best part according to IB (man i am pissed off) for them to allow me to trade with that $3900 is to allow me to trade on margin!! Yes!! YEs FOr me to trade with my own cash is to trade on margin!! b/c in their moron world they have already paid out the cash to BUY the stock BUT BUT they must wait 3 days to get the proceeds form the sale!! My fucking head is spinning! Is it me? I mean am I dreaming here? somebody explain to me the flaw in my logic please! cause i cannot believe a place with this level of stupidity actually has my money! Actually runs a business! I would greatly appreciate feedback just to assauge my poor head that i have not gone completly insane. I am quite pissed but would really like to know how IB is correct in effectively insuring that no cash accounts daytrade with them.
You cannot day trade with a cash account. There is a PDT (pattern day trader) rule that basically says if you trade 3 times within 5 days (I think I got that right) you're a daytrader. If this is the case, you must fund and maintain an account of at least $25,000. Realistically, you'll need more to account for losses that will drop you below your original amount. Please, do not take this as an insult. This is a complex game. If you were not aware of this basic rule, you're probably not aware of a lot of other things that are very important. My sincere suggestion is to paper trade until a)you're a millionare on paper and b)you can study all the nuances of security trading regulations that will affect how and when you trade. Best of luck
Oops, Forgot to complete my thought. You also need a margin account for the reasons that IB explained. It has to do with the way clearing is done. This may not sound logical. But it doesn't matter. The markets aren't logical either. You need to get used to this fast and keep emotion out of it, or your account will evaporate really fast.
How on earth did you manage to pass IB's "qualification exam" and agree to all their very explicitly stated terms of service and still have no clue? You must have a lot of money to just wire to whatever broker sounds nice. --opm8
This has been beaten to death on IB's own boards. It's called freeriding and is explicitely prohibited by the SEC. You can't trade in a cash account with funds that haven't been settled. You can trade that way with a margin acct but still can't daytrade >3 times in 5 days unless you're at 25K or more.
I do appreciate the response and in trying to keep my post as short as possible (to avoid people having to read me ranting) i missed saying a few things. One of the reasons I am so angry (less so now) is that I traded with datek with less then 25k and had no problems (most trades in a day was 5 round trip) and i averaged like 20 trades (round) a week. and the only time settlement was a issue was when i withdrew my money to open the IB account. (i had to wait t+3) and as far as the 25k, and i could be wrong here, but isnt the 25k required to trade on margin accounts.? and again when i spoke to IB they did not reject my 4th trade b/c i was labeled a pdt, if that was the case my third trade would not have gone thru <---one of the more gapping holes in IB's logic. they refused my 4th trade b/c I had no cash left and had to wait for my trades to settle and the cash would become available. <---- that is the issue i have it makes no fucking sense (to me at least) I am hoping someone here can show me where i am wrong. IB customer service was just about as useless as getting stock picks from crackheads.
that's why there's a difference between a margin acct and a cash acct. if you find a broker that doesn't follow the settlement rules please let us know.