Can I day trade with a cash account? You can day trade with two types of accounts; cash account and margin account. Some traders prefer to day trade with cash accounts. The best way to associate cash and margin accounts in your mind is to compare them to a known scenario; which would be cash vs credit. Cash makes it easier to budget and stick to a certain amount because you can’t exceed what you don’t have. Credit cards accrue interest, and you don’t have to have the amount readily available to pay back and still obtain the item you are desiring at that present time.
When you want something that you can’t afford at that moment credit cards are there to assist. Some might argue, that credit cards are more convenient and secure compared to carrying cash. Credit card credit lines can feel like an extension of your income. But you need to realize that credit card spending establishes a short-term loan of the credit card company’s money. This country is in so much debt because people don’t know how to properly manage money and invest. Cash gives you your day trading buying power needed to partake in a trade.
Type of Accounts
Margin accounts allow investors to borrow money against the value of the securities in their accounts. With a margin account, you’ve got leverage and you are unrestricted in terms of the number of trades you can take. Margin accounts expose you to a higher risk of bigger losses. It also allows you to earn more from the gains of your trades. But it also opens you up like a credit card where you might be obligated to use more money than you should.
Cash account holders have no risk of receiving a margin call. A margin call is when your broker decides to terminate the margin loan they have given to you. With a margin call, your broker will usually liquidate the securities you bought to cover the loan. If you are indebted to them any more money after that; you’re required to add more cash or securities to cover that loan. A cash account requires that all transactions must be made with available cash or long positions. Cash accounts limit you to trade the money you have on hand. A cash account will be a slower process if you don’t have much to trade with. But you don’t have to worry about broker fees or owning anymore any money.
When treading in unknown waters it is important to use caution and be familiar with the trading rules. Rules help us stay in line and help us identify what lines not to step over. With a cash account after you make a transaction, there is a settlement period; the period is two days after that trade. With a cash account, you can only day trade with settled funds. If you do not abide by this you can have good faith violations (GFV). A good faith violation occurs when a cash account buys a stock or option with unsettled funds. Then liquidates the position before the settlement date of the sale that produced the profits.
The Financial industry regulatory authority (FINRA) pattern day trader rule is any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five-day period; business day period. It is very important to know if your account is less than 25k. When your account is over 25k the only three-day trades pattern day trading rule doesn’t apply to trade stocks. You only get a one-time pass for the life of your trading platform account so tread lightly.
Summary: Can I Day Trade With A Cash Account
As you can see it is possible to day trade with a cash account and those options involve risk. But as long as you stay well informed you can be successful and not make any mistakes that can cause your day trading activities to be suspended or denied account access. Using a cash account helps keep you grounded and not spend more than what you have readily available. With having the rules in mind when using a cash account, you are already ahead of the game by avoiding issues others had to deal with. You learned can stay away from margin accounts and still be successful. You also learned that margin accounts can be similar to credit cards because the brokerage firm lends you money that has to be paid back with fees.
My goal has always been to teach as many day traders to achieve their personal financial goals, whether they are novice traders or experienced traders. The MK VIP training has plenty of resources to help you get started on reaching your day trading goals. Also, help guide you from committing mistakes that can hurt you as a person and a day trader. The last thing I would want is for someone to put themselves in further debt or get into debt. This is why I think the right mentor and strategy will help stray you onto other paths.
I teach the working class how to earn $10,000 a month through day trading. I can teach you how to day trade like the top 10% without a complicated strategy or any technical indicators, even if you are a beginner. I help my students avoid the challenges I faced when I first became a day trader. As of now, MK Financial LLC is already the #1-day trading coaching business in the US in just one year. You are just a click away from learning what you need to become a day trader and take your life and salary to the next level.
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”