Someone made the comment the other day about his retirement
account and the 3 day settlement rule, where it takes 3 days for
funds to settle after you sell, therefore you have to wait for 3
days before you can utilize that cash.
Yes that's true but it should not be a problem UNLESS you are
putting more then 50% or 100% of your money into a trade, which you
should NOT be doing. If you are using proper money management
and placing at least less then 50% of your account into a trade,
then you will have funds available for a new trade right away vs
waiting for 3 days, even if you had to sell right away (like
yesterday).
Again I only see this problem if you are placing the majority of
your account or 100% of your account into one trade, which you
should not be doing anyway
For instance, if you have the bulk of your account tied up in
long term investments and you put the remaining cash into a day
trade, you can't make another purchase for three days. I
never put more than 10% of my account into a trade, but I've run up
against the restriction several times. It prevents me from
making quick trades during market inflection points for fear of not
having available cash when the market finally chooses a
direction.
Posted by onefourdroopy on 5th of May 2011 at 11:47 am
Think or Swim will let you day trade all you want in a IRA
account if you make all the trades in the same day, but if you hold
a trade overnight then its one business day, then you can trade
again.Its a IRA margin account they call it. I left Etrade over the
3 day rule. Check it out
Matt said it best, if using 50% should be no problem.
But If you sell on a Monday it settles on Thursday, you can use
that cash immediately to buy something during that 3 day
period....you just can't then sell the new purchase until the
original 3 day period is up Thursday in my example. etc etc.
But If you sell on a Monday it settles on Thursday".....
If I sell on Monday, I will buy at the close on Wednesday. When
I do I get a message that I am buying with unsettled funds, but I
don't care because they will settle overnight and be settled at
Thursday's open, so that I can sell if need be. So in a way, it is
not 72 hours but two full trading days plus what is left after I
sold on Monday. I don't see the need to actually wait until
Thursday. However, buying before settlement I would only do in the
last 5 minutes of a trading day because some big moves can happen
at the close and once I buy, I am holding overnight.
if you have a certain number of reg T violations...if not, then
you can be on easy street. If they try to restrict you without you
pulling violations (they never have with me) then time to change
brokers.
IRA and 3 day buy/sell rule
Posted by matt on 5th of May 2011 at 10:40 am
Someone made the comment the other day about his retirement account and the 3 day settlement rule, where it takes 3 days for funds to settle after you sell, therefore you have to wait for 3 days before you can utilize that cash.
Yes that's true but it should not be a problem UNLESS you are putting more then 50% or 100% of your money into a trade, which you should NOT be doing. If you are using proper money management and placing at least less then 50% of your account into a trade, then you will have funds available for a new trade right away vs waiting for 3 days, even if you had to sell right away (like yesterday).
Again I only see this problem if you are placing the majority of your account or 100% of your account into one trade, which you should not be doing anyway
3 day rule a problem more often than you'd think
Posted by lynmarie on 5th of May 2011 at 04:18 pm
For instance, if you have the bulk of your account tied up in long term investments and you put the remaining cash into a day trade, you can't make another purchase for three days. I never put more than 10% of my account into a trade, but I've run up against the restriction several times. It prevents me from making quick trades during market inflection points for fear of not having available cash when the market finally chooses a direction.
3 day rule
Posted by carpru on 5th of May 2011 at 05:03 pm
Think or Swim will let
Posted by onefourdroopy on 5th of May 2011 at 11:47 am
Think or Swim will let you day trade all you want in a IRA account if you make all the trades in the same day, but if you hold a trade overnight then its one business day, then you can trade again.Its a IRA margin account they call it. I left Etrade over the 3 day rule. Check it out
IB will let you trade
Posted by Michael on 5th of May 2011 at 09:29 pm
IB will let you trade futures in an IRA.
Reg T violations and the 3 day rule
Posted by perthx on 5th of May 2011 at 11:05 am
Matt said it best, if using 50% should be no problem.
But If you sell on a Monday it settles on Thursday, you can use that cash immediately to buy something during that 3 day period....you just can't then sell the new purchase until the original 3 day period is up Thursday in my example. etc etc.
So Called 72 hour settlement period
Posted by dougmil on 5th of May 2011 at 12:13 pm
But If you sell on a Monday it settles on Thursday".....
If I sell on Monday, I will buy at the close on Wednesday. When I do I get a message that I am buying with unsettled funds, but I don't care because they will settle overnight and be settled at Thursday's open, so that I can sell if need be. So in a way, it is not 72 hours but two full trading days plus what is left after I sold on Monday. I don't see the need to actually wait until Thursday. However, buying before settlement I would only do in the last 5 minutes of a trading day because some big moves can happen at the close and once I buy, I am holding overnight.
Doug Milliken
possible restriction
Posted by rgaiti on 5th of May 2011 at 02:39 pm
some brokerage houses (eg Merrill) may restrict your account if you buy with unsettled fund too often (3x in 90 dyas) be aware
They MUST restrict
Posted by perthx on 5th of May 2011 at 02:43 pm
if you have a certain number of reg T violations...if not, then you can be on easy street. If they try to restrict you without you pulling violations (they never have with me) then time to change brokers.
trade date + 3 days
Posted by rslph on 5th of May 2011 at 12:29 pm
Your funds are settled overnight Wed - Thurs and are clear on Thurs.
Ralph