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1. Without trading on margin (<25,000 account equity) how actively can I trade in a given week? The way I understand it is that you may not re-enter a position within a business day. If I am scalping a few (same or different) equities a few times a week, is this allowed under FINRA and SEC regulations? What exactly am I allowed to do whilst trading on a non-margin account?
2. Taxes. Short term positions get taxed at your income tax level. So lets say my work income is just shy of a higher tax bracket by a vouple thousand dollars. Will the first couple thousand in capital gains be taxed at said rate, with any extra gains taxed at the next higher rate?
1) In a NON-MARGIN ACCOUNT, you can day trade all you like as the pattern day trading rules apply to margin accounts only. But what you need to watch out for, and what makes day trading in a non-margin account difficult, are the freeriding rules. Freeriding is when you sell something that you haven't technically paid for yet. E.g., if you have $1000 cash in your account, you buy $1000 of XYZ, then sell it 2 hours later, then immediately buy $1000 of ABC with unsettled funds (which is okay), THEN sell that ABC 2 days later. That's a no-no, because technically, you haven't PAID for ABC until 3 days after the purchase date. Now, if you use only 1/3 of your settled cash per day on trading, you can get around the freeriding rules, but that can be difficult, especially with smaller accounts.
I should point out that some brokers have stricter rules than FINRA's, so you may need to check with yours.
With even 25K, you're not likely gonna benefit much from day trading all the time.. the commissions and/or spreads will eat you alive.
Define much.
I can trade blue chips as they bounce around their respective moving averages and gain 2-5% a day. $7 commissions and a 15% tax rate are hardly detrimental.
Fundamentals mean just about zero when it comes to day trading. Longer-term trading, sure.
I don't know much about day trading. Seems most people who try it don't either. And the egos of those who describe themselves as day traders seem to be ...well, sometimes a little inflated.
But a while back we had a case where someone was all fired up because he thought he had scored with Bank of Greece. We had a thread about it. Turns out we were watching a reverse split, which he didn't know anything about because he was just a chart watcher. Seems to me a knowledge of the fundamentals would have kept him out of trouble. But maybe not.
Anyway, in the past you have said that most people should not day trade, and I agree with that. People are still going to try, though. Maybe he'll make it. Hope so.
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