What type of trading should I use?

[karateadult]

I have a pretty good job and not a lot of expenses. What I would like to do eventually is to learn to day trade, but I before then I would like to try a less extreme version of trading.

I would like to trade a very high volume stock, say coca cola or something, and just buy at what looks like the low for the day and sell at closer to the high for the day.

Now I know that if I am buying and selling in the same day that this would perhaps qualify me for daytrading, but I am uncertain how it works when I would have less than the $25k to start a daytrader's margin account in the US.

I know that it takes some time after selling a stock before I can use the money that I got back out of the stock to buy a new one but I am not sure how long or how often I can buy another stock with the same money after selling the previous without needing a daytrader's account.

Ideally, I would like to start with maybe $5k and buy / sell a big stock as often as I can. My question is, how often can I do this? Do I need to wait 3 days after selling the stock? How can you tell?

 

[malaguti]

I would like to trade a very high volume stock, say coca cola or something, and just buy at what looks like the low for the day and sell at closer to the high for the day.

Just buy at the low and sell at the high..damn. That is pretty amazing, I cant think why we all havent tried doing that
On a more serious note, why not get a strategy and forget about the low and high for a day, but find a trend, get an entry point on that trend and then leave it. If you continue to buy every few days, you are racking up your costs and all you are doing is entering higher and higher and higher. Your percentage return will be alot less than had you bought at a good price and then left it well alone

 

[karateadult]

Just buy at the low and sell at the high..damn. That is pretty amazing, I cant think why we all havent tried doing that
On a more serious note, why not get a strategy and forget about the low and high for a day, but find a trend, get an entry point on that trend and then leave it. If you continue to buy every few days, you are racking up your costs and all you are doing is entering higher and higher and higher. Your percentage return will be alot less than had you bought at a good price and then left it well alone

Sure that works if you can identify a trend, but a big stable stock to has a high/low maybe 3% apart and stays roughly the same every day would be a good way to make 3% as often as you could trade, I would think.

Anyway, do you know the answer to my question of how often can I trade without having a daytrader account?

Do I need to wait 3 days after selling before I can use that money again?

 

[malaguti]

Sure that works if you can identify a trend, but a big stable stock to has a high/low maybe 3% apart and stays roughly the same every day would be a good way to make 3% as often as you could trade, I would think.

Anyway, do you know the answer to my question of how often can I trade without having a daytrader account?

Do I need to wait 3 days after selling before I can use that money again?

Ahh so now we are getting closer to hitting that nail.
If you cant identify a trend are you really sure you want to be trading it? You want it to go up right? So why not start there..how to identify the trend.
Surely it matters little how often you buy and sell something. Daytrading is simply word that somebody made up. You said already you don't want to be doing that..so call yourself a swing trader. Just define that trend first.
And I really would advise trying to make 3% in the way you've described. Like I say, if "daytrading" were that easy, then we'd all be particularly wealthy

 

[karateadult]

Great, so how often can I trade?

I have traded stocks before as a hobby, but nothing serious. I would just like to do this with some extra money and try to learn as I go.

I guess what I am looking to do is not super short term trading but not long term either. Ideally I would like to find a short term trend and take advantage of it and then move on to another. What I don't know though, is can I only do this once every 3 days or is there a way to do it more often?

 

[malaguti]

Great, so how often can I trade?

I have traded stocks before as a hobby, but nothing serious. I would just like to do this with some extra money and try to learn as I go.

I guess what I am looking to do is not super short term trading but not long term either. Ideally I would like to find a short term trend and take advantage of it and then move on to another. What I don't know though, is can I only do this once every 3 days or is there a way to do it more often?

You can trade as often as you like. I've traded stocks multiple times during the day. As long as your broker supports someone trigger happy. Why not ask them?

 

[karateadult]

You can trade as often as you like. I've traded stocks multiple times during the day. As long as your broker supports someone trigger happy. Why not ask them?

There is a thing called pattern day trading in the US at least, if you execute four or more “day trades” within five business days then you need a margin account with at least $25k in it.

Also, if I sell stock and buy another before that trade clears then that is free-riding.

 

[wino59]

There is a thing called pattern day trading in the US at least, if you execute four or more “day trades” within five business days then you need a margin account with at least $25k in it.

Also, if I sell stock and buy another before that trade clears then that is free-riding.

If you don't have 25k and want to day trade, set up a cash account as opposed to a margin account, then you day trade as much as you want. The problem is you won't have the leverage, but since you are new at it, that probably isn't such a bad thing.

 

[malaguti]

There is a thing called pattern day trading in the US at least, if you execute four or more “day trades” within five business days then you need a margin account with at least $25k in it.

Also, if I sell stock and buy another before that trade clears then that is free-riding.

well lets see..
You dont want to day trade, you want to find a trend and hold onto it for a few days, and your own regulation doesnt let you without incurring a larger capital sum.
So in answer to your question...what type of trading should you use..
I'd say swing trading, learn how to define a trend and hold onto it for a few days.
It might have been my first post..but glad we got there

 

[karateadult]

well lets see..
You dont want to day trade, you want to find a trend and hold onto it for a few days, and your own regulation doesnt let you without incurring a larger capital sum.
So in answer to your question...what type of trading should you use..
I'd say swing trading, learn how to define a trend and hold onto it for a few days.
It might have been my first post..but glad we got there

I'm glad you were able to help someone new to the forum out without every post dripping with sarcasm and condescension. A lesser forum-goer would not have such restraint and I do thank you honestly for your input.

 

[malaguti]

I'm glad you were able to help someone new to the forum out without every post dripping with sarcasm and condescension. A lesser forum-goer would not have such restraint and I do thank you honestly for your input.

You are more than welcome. I do honestly hope you get that trend sorted out though. Once I got that, it all started fitting into place. And also, like I said in my first reply, getting one good entry and riding it is the key. It will save you so much.
Regardless of if you did day trade, you will make more for certain

 

[karateadult]

If you don't have 25k and want to day trade, set up a cash account as opposed to a margin account, then you day trade as much as you want. The problem is you won't have the leverage, but since you are new at it, that probably isn't such a bad thing.

I was under the impression that if I have a cash account and use all of that cash to buy "x" stock and then sell it shortly after, I would need to wait until that sale clears before I have any money to use on a new trade. Is this not the case?

I found this in a google search, is it accurate?

"The funds settle in 3 working days. If you sell on a Monday the funds are settled on Thursday...and if you sell on Tuesday.. settled on Friday...etc. But you can still buy stock with those unsettled funds. The deal with that though, is that if you buy with unsettled funds, you can not turn around and sell what you just bought with the unsettled funds until they are settled. So for instance, if you sold on Monday, you could buy again immediately after, but would have to hold what you buy if you use the unsettled funds, until Thursday before you could sell them again. "

 

[timsk]

Hi karateadult,
Welcome to T2W!

Regarding your question about day trading and funds, this should answer it: Pattern Day Trader

You can get around this by opening an account with a broker who is not regulated by the SEC or other reulatory bodies. However, many members would advise against this as the risk of losing any money deposted with them increases exponentially! A less risky solution is to trade a derivative product such as Contracts for Difference. (NB: when I say 'less risky' - I'm referring to the possibility of losing your money because the brokerage firm goes belly up or the finance director diappears with client funds to an island in the sun with no extradition agreements with other countries.) The benefit of this is that you can day trade with much less than the $25k PDT rule, trade a variety of markets from a single account denominated in GBP£ and enjoy the benefits of a broker registered with all the main relatory authorities. As with most things in life, there are some down sides of course - most notably spread - which is likely to be wider than it would be if your were trading the underlying instrument with a firm such as Interactive Brokers.

CFDs are quite a sophisticated instrument ad not normally recommended to beginners. Most newbies start with a spread betting account which, like CFDs, has its own set of pros and cons. To learn more about both and how they contrast and compare, take a gander at this FAQ: What are the Pros and Cons of Spread Betting Vs CFDs?
Enjoy!
Tim.

PS. Just noticed the U.S. flag in your panel. U.S. citizens aren't able to open spread betting accounts - so CFDs are probably your best option - unless anyone else has any other ideas.

 

[karateadult]

Hi karateadult,
Welcome to T2W!

Regarding your question about day trading and funds, this should answer it: Pattern Day Trader

You can get around this by opening an account with a broker who is not regulated by the SEC or other reulatory bodies. However, many members would advise against this as the risk of losing any money deposted with them increases exponentially! A less risky solution is to trade a derivative product such as Contracts for Difference. (NB: when I say 'less risky' - I'm referring to the possibility of losing your money because the brokerage firm goes belly up or the finance director diappears with client funds to an island in the sun with no extradition agreements with other countries.) The benefit of this is that you can day trade with much less than the $25k PDT rule, trade a variety of markets from a single account denominated in GBP£ and enjoy the benefits of a broker registered with all the main relatory authorities. As with most things in life, there are some down sides of course - most notably spread - which is likely to be wider than it would be if your were trading the underlying instrument with a firm such as Interactive Brokers.

CFDs are quite a sophisticated instrument ad not normally recommended to beginners. Most newbies start with a spread betting account which, like CFDs, has its own set of pros and cons. To learn more about both and how they contrast and compare, take a gander at this FAQ: What are the Pros and Cons of Spread Betting Vs CFDs?
Enjoy!
Tim.

PS. Just noticed the U.S. flag in your panel. U.S. citizens aren't able to open spread betting accounts - so CFDs are probably your best option - unless anyone else has any other ideas.

How about a margin account with less thank $25k? If I have a margin account, could I make a buy on monday, sell it on tuesday and buy another stock the same day, sell that wednesday and buy another one later that day? From how I interpret the pattern day-trader definition, this doesn't seem like it would qualify.

I am just looking to do beginner trading without being limited by only being able to make ~1-2 trades per week. Sorry if this sounds impatient, I am just eager to get into it.

 

[timsk]

How about a margin account with less thank $25k? If I have a margin account, could I make a buy on monday, sell it on tuesday and buy another stock the same day, sell that wednesday and buy another one later that day? From how I interpret the pattern day-trader definition, this doesn't seem like it would qualify.

I am just looking to do beginner trading without being limited by only being able to make ~1-2 trades per week. Sorry if this sounds impatient, I am just eager to get into it.

Hi karateadult,
If you open and close 4 or more trades within 5 business days then you're classified as a pattern day trader (PDT). For example, you open and close a trade on Monday, a second one on Tuesday, a third on Wednesday and a 4th one on Thursday. At the point you close Thursday's trade you'll be classified by your broker as a pattern day trader. If you've less that USD$25k in your account - they won't permit you to continue doing it. So, if that's what you want to do, you have three choices:
1) Cough up $25k to open a PDT account. (In reality you need $30k+ to allow some breathing room and some losing trades which you'll almost certainly have.)
2) Go down an alternative route such as the one I outlined in my last post.
3) If you haven't got $25k, make sure you don't open and close 4 or more trades within 5 business days!

Clear?
Tim.

 

[wino59]

How about a margin account with less thank $25k? If I have a margin account, could I make a buy on monday, sell it on tuesday and buy another stock the same day, sell that wednesday and buy another one later that day? From how I interpret the pattern day-trader definition, this doesn't seem like it would qualify.

I am just looking to do beginner trading without being limited by only being able to make ~1-2 trades per week. Sorry if this sounds impatient, I am just eager to get into it.

You can do that... I have an account with TD Ameritrade... I have a margin account under 25K... I have 3 day trades per rolling 5 trading days.

In order for it be a day trade you have to open and close on the SAME day. Other wise it does not count as a day trade. I have personally made 12 trades in the last 5 days, 2 of them closed in the same day...7 of the trades closed the next day and 3 of them closed in 3 days. I have 1 day trade remaining until Wednesday, then I get one back, and then Thursday I will get another one back, so I will be up to 3 again provided I don't have any trades that open and close the same day between now an then.

As long as I do not go over the 3 "day trades" in a rolling 5 day trading period I am fine.

Keep in mind if you trade option contracts the same rule applies.

 

[karateadult]

You can do that... I have an account with TD Ameritrade... I have a margin account under 25K... I have 3 day trades per rolling 5 trading days.

In order for it be a day trade you have to open and close on the SAME day. Other wise it does not count as a day trade. I have personally made 12 trades in the last 5 days, 2 of them closed in the same day...7 of the trades closed the next day and 3 of them closed in 3 days. I have 1 day trade remaining until Wednesday, then I get one back, and then Thursday I will get another one back, so I will be up to 3 again provided I don't have any trades that open and close the same day between now an then.

As long as I do not go over the 3 "day trades" in a rolling 5 day trading period I am fine.

Keep in mind if you trade option contracts the same rule applies.

Yes, this is what I want to do. When you buy new stock with unsettled money like this using a margin account, is this the same thing as when you buy stock on margin or is it different but only allowed with a margin account? I don't want to be risking more than I put down I just want to be able to make a lot of trades like this.

Oh also, any recommendations for an online stock broker for someone in the US? I've read that the cheaper commission brokers are slower to execute trades / don't make sales at as good of prices than the more well known ones. I have used zecco before, how are they compared to something that costs maybe double per order such as td Ameritrade?

 

[wino59]

Yes, this is what I want to do. When you buy new stock with unsettled money like this using a margin account, is this the same thing as when you buy stock on margin or is it different but only allowed with a margin account? I don't want to be risking more than I put down I just want to be able to make a lot of trades like this.

Oh also, any recommendations for an online stock broker for someone in the US? I've read that the cheaper commission brokers are slower to execute trades / don't make sales at as good of prices than the more well known ones. I have used zecco before, how are they compared to something that costs maybe double per order such as td Ameritrade?

I think there are a couple of things to look at... I personally like TD Ameritrade and the Think or Swim Plattform, and I am paying between $5 and $7.50 per trade, depending on how many shares...I usually purchase between 100 and 1000 shares at a time. I know it is a little higher than some of the others, but I don't have any trouble getting in and out of trades at the prices I want. Easy borrowing of stocks for short selling, etc.(this part is extremely valuable to me)

If price is your concern, then do some shopping and find the biggest reputable company at the lowest cost.