A society without rules and laws would be complete chaos. Just like everything else in life, day trading also have rules if your account is under 25k. If rules are not met just like if an individual committed a crime there would be a consequence. The same applies to day trading, and we will go over and discuss the repercussions. There are many people that don’t like following the rules because they represent some kind of restriction. But I assure you when it comes to day trading you want to stay in line because it will affect your pockets if you don’t.
Every sporting event, domino game, board game, and card game has a set of rules. So why would there be any rules with day trading especially when there is the possibility for monetary gain? Day traders need to be in the know so they can be compliant with rules and regulations. Day trading can be riskier if knowledge is not in place. Before we get into the rules let’s quickly discuss what day trading is.
Get In the Know
Day traders buy a stock at one point during the trading day and then sell out of the position before the market closes. The most successful day traders will use a strict methodology to analyze potential turning points in the market for entry and exit points; which translates to buying and selling. With trading options, you can purchase a call or a put option. A call option gives you the right to buy a stock and a put option gives you the right to sell the stock. If you believe the market is trending upwards, you would purchase a call option. If you felt the market was trending downwards, you would purchase, and put contracts. You would then sell your contracts to either follow your strategy or to minimize a loss.
Professional traders become disciplined and allocate time to be successful day traders. They need liquidity and volatility to be high; as it makes it easier to make money. The best hours for trading are 9:30 am to about noon ET; when the stock market first opens to lunchtime. Then again 3:00-4:00 pm ET is referred to as power hour; as it is the last hour before the stock market closes. With day trading it becomes evident quickly that time truly is money.
Day Trading Rules Under 25k: Type of Accounts
Trade with money you can afford to lose; because the reality is you can lose it all. To trade, you will need to open up an account, either cash or margin. Margin means you are borrowing money from a brokerage firm to trade. Margin accounts offer leverage, and carry additional risk. With a margin account, you make have up to 4x day trade buying power, and up to 2x overnight buying power. You need to maintain a minimum of $2.00 of cash and/or marginable equity in a margin account to access the leverage 2x and 4x buying power.
Cash accounts do not offer leverage, and you can only trade with settled funds. With a cash account, you trade with the money you deposit. You can’t access leverage even if your account is over $2,000. Day trading rules do not apply to cash accounts, but you must abide by cash settlement rules. If you sell a position that you purchased with unsettled funds in your cash account, you will incur a Good Faith Violation. It’s called ‘good faith violation’ because there was no effort in ‘good faith’ to add necessary funds to the account before the settlement date.
You don’t need a lot of money to open a day trading account, you can easily start with $100 and grow from there. You also don’t need multiple brokerage accounts for a successful trading experience. 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. With the day trading accounts, there are several options to be able to trade as easily as from your mobile phone, to a laptop or a desktop.
Summary: Day Trading Rules Under 25k
You have learned that rules will follow you wherever you may go, and they are in place to keep order. If you don’t abide by the less than 25k rule, your account can be frozen, and it won’t let you trade until you have $25,000 in your account. For the life of the account, you are only allowed to undo that once. If the issue happens where you do more than three trades in a five-day business period, you will be stuck. You are looking to get into day trading to help get you out of that, not to get in it.
This is why it is important to know the rules early on, so you don’t put yourself in a predicament. My goal has always been to help as many day traders 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. With my program, you can learn how to begin day trading and I will guide you to the knowledge you need to stay in the know. I can teach you the best strategy that if you put in the work and practice, you will be a successful trader for at least 80% if not more of your trades; winning trades. All you have to be is willing and hard-working, and you are already halfway on your way to success. With my help, we can knock it out of the park together.
Learn More
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.”
