Ok I just read the blurb at the US government web site. So how does that affect me if I have an online trading account with a minimum startup balance of $1000. What's there to stop me from executing a day trade if the money's in my account?
Assuming you plan to trade 100 shares at a time, why would you choose to pay between $7.00 - $13.00 at Etrade, when the same trade would cost you one dollar at MBT? - Spydertrader
It not a question of executing a trade (and the holding period, day versus multiday is irrelvent), its a question of how often you can recycle that money. Just because you sell a stock doesn't mean you get the proceeds instantly (to trade with again). Here is a notice I found posted that was from an eTrade customer (from eTrade I would assume):
Sure, it usually comes as a shock to most folks the first time they are told about it because its not intuitive unless you understand the settlement process. The only way to avoid it is to open a margin account instead of a cash account. The deposit requirements for a margin account are much higher though.
How about 5000 shares at 0.10 per share. It goes up to .11 and I sell. I make $50 minus buy and sell commisions. At eTrade thats $10X2 = $20 so I still come out ahead. If the rate is .005 like at MBT then the commision is going to be $50. IB would be cool, but like I said, I want to just try something easy to begin with.
MBT offers flat rate $9.99 trades as well. Please don't tell me that you are really planning on trading penny stocks like that example you gave.
Its probably better if you just try it and see. Everyone has to find their own path and pay their dues.
Oh! My apologies. I didn't realize when you said, "I want to place the smallest trades possible," you actually meant, "I want to scalp trade 5000 share blocks of penny stocks." Good Luck with that business model. One final piece of advise though: make sure you can afford to lose that initial $1000 USD account you open up with Etrade because you won't have your money very long with such foolishness. Good Trading to you. - Spydertrader