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I have margin account with about $50K and I did my first trading. Even before the settlement date of 3 day, I did a trade again and I'm holding on my purchase. The second purchase I made was within 50K. By doing this, will I be charged interests?
I'm planning on doing trading few times a week and but within my cash limit without using the brokers margin. Are there any hidden risk that a novice trader should be aware of doing this other than being tagged PDT?
Settlement periods are mostly meaningless in margin accounts. You won't be charged margin interest unless you actually buy more than what you have in cash. Even the PDT rules are nothing to worry about since you have much more than $25k in your account.
What in the World are you thinking opening and using a Margin Acct.
She may be thinking about getting around the 3-day settlement hassles you have with cash accounts, which is why MANY traders open margin accounts and a good reason to do so, IMO. She said he won't be USING her margin, and if that's the case, she has nothing to worry about. (Nothing to worry about specifically pertaining to the margin account, that is.)
She may be thinking about getting around the 3-day settlement hassles you have with cash accounts, which is why MANY traders open margin accounts and a good reason to do so, IMO. She said he won't be USING her margin, and if that's the case, she has nothing to worry about. (Nothing to worry about specifically pertaining to the margin account, that is.)
I would like to hear Teana say thats what will be happening, but even then I cannot believe it. Not for a Novice.
Margin accts. are a lot like Credit Cards. They give you a false sense of power. If you got one you Use It.
Once you get behind, your trapped.
There like Drugs. First they get you Hooked a little bit at a time. Next thing you know the Preditor has your Head in It's Mouth.
You might as well go to the Casino if you just want to throw your money away. At least they will entertain you while they Rob you.
The 3 day settlement period is not a problem until you sell and want to buy back within the 3 days. That won't happen if you keep a small but adequate reserve at all important times.
If you cannot do it then thats a symptom of not enough funds to Trade, and an inability to control your spending qualifications. ie. Trade to many stocks at 1 time.
To me the Downside Risk is FAR GREATER then the Possible Upside Benefit for a Novice.
Just Look at the American Publics average Credit Card Debt. Yikes...
Being a novice means you're likely to make the usual novice trading mistakes--it doesn't mean that you're necessarily devoid of all self-control, though. For some, yeah, margin is a dangerous thing. For others, no. Everyone's different.
Thank you soo much LongArm and Silverfox for your valuable answers. I was away for a day.
Here's my situation. I brought ABC stocks and sold it the same day for a meager profit. The second day I wanted to try the same thing, but I got a "free ride" warning. So, I decided and opened a margin account so that I could buy XYZ and sell it the same day before settlement - if it's profitable. Otherwise, I might hold on to it for a day or two before I sell it again. Without a margin account I will not be able to sell XYZ until settlement.
Now that I have margin account and have purchased stocks before settlement, I'm concerned about the interest rates on my purchases. Although my purchase is within my initial investment range (settlement amount), I'm not sure if I will be paying interests. In the best of times I'm planning on doing this 5-6 times a week but I'm not sure of the real consequences. I did Google, but could not find a convincing answer. I hope you experienced geeks can answer me.
Now that I have margin account and have purchased stocks before settlement, I'm concerned about the interest rates on my purchases. Although my purchase is within my initial investment range (settlement amount), I'm not sure if I will be paying interests. In the best of times I'm planning on doing this 5-6 times a week but I'm not sure of the real consequences. I did Google, but could not find a convincing answer. I hope you experienced geeks can answer me.
I already answered you in my first reply, Teana. You're NOT charged margin interest unless you spend more than what you have in cash. If you have a $50k account, and you don't SPEND more than $50k, you won't be charged margin interest. As I said, settlement periods are meaningless in a margin account, so whether you buy something before a prior trade has (technically) settled doesn't matter--you're still not charged interest.
I already answered you in my first reply, Teana. You're NOT charged margin interest unless you spend more than what you have in cash. If you have a $50k account, and you don't SPEND more than $50k, you won't be charged margin interest. As I said, settlement periods are meaningless in a margin account, so whether you buy something before a prior trade has (technically) settled doesn't matter--you're still not charged interest.
LongArm,
Your reply does not clearly say which acct. @ $50,000 you are refering to.
Teana does not say how much money is in her Cash acct.
While Teana is stressfully focused on her margin interest, she will really be stressed when one or more of here stocks takes a hit as well.
Teana ... Tell us how much of your own money you have to invest.
Margin acct. Purchase Example.
Buy Monday sell in 7 days. Interest starts on the day of settlement Thursday.
You pay interest from Thursday to sell date.
Buy on Monday and sell on Tuesday.
Buy Interest starts on day of purchase settlement. Thursday.
Sell settlement 3 days. Friday.
You pay 1 day Interest.
Your reply does not clearly say which acct. @ $50,000 you are refering to.
Teana does not say how much money is in her Cash acct.
She stated in her first post that she has a $50k MARGIN account and asked whether she'll be charged MARGIN interest in that account. She repeated that in her second post. It's clear therefore that we're referring to a MARGIN account here. She hasn't asked any questions about a cash account.
BTW, you should make clear that your examples apply only if she's spent more on her purchases than she has in cash.
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