Category: Day Trading

Buying power refers to the total funds that an investor has available to trade securities, and it equals cash held in the account plus available margin. According to FINRA rules, a broker-dealer client who is designated as a pattern day trader may trade up to four times their maintenance margin excess as of the previous day’s close of… Continue reading What Is Day Trading’s Buying Power?

According to the Financial Industry Regulatory Authority (FINRA) rules, the minimum equity requirement for a client of a broker-dealer who is designated as a pattern day trader is $25,000, which must be deposited into the client’s account prior to any day-trading activities and maintained at all times

Day traders typically do not hold positions overnight for a number of reasons: Most brokers have higher margin requirements for overnight trades, and therefore additional capital is required; a stock can gap down or up on overnight news, inflicting a big trading loss; and holding a loss-making position overnight in the hope that part or all of the losses… Continue reading Why Don’t Day Traders Hold Positions Overnight?

Arbitrage is the simultaneous purchase and sale of the same security in different markets to profit from minute differences in the security’s price in these markets. Because arbitrage provides a mechanism to ensure that any deviation in the price of an asset from its fair value gets corrected rapidly, arbitrage opportunities seldom last long.

Though day trading is not illegal or unethical, it can prove very risky. Because most day-trading strategies employ leverage in margin accounts, day traders can potentially lose more than they have invested and end up in significant debt.

You can check your classification at the bottom of your Balances page: Go to your Trading Profile and select the Trade Restrictions & Violations link. Additionally, if you have an intraday buying power balance that means you’re classified as a pattern day trader as this balance only displays for day traders. Intraday buying power is… Continue reading How do I know if I’m classified as a day trader?

Day trading is defined as buying and selling the same security—or executing a short sale and then buying the same security— during the same business day in a margin account. Pattern day traders, as defined by FINRA (Financial Industry Regulatory Authority) rules must adhere to specific guidelines for minimum equity and meeting day trade margin calls.