day trading stock buying power?

I currently have $4,000 in a discount brokerage account. This allows me to buy up to $12,000 worth of stocks by using margin. Since I was off work this past week I decided to buy a couple stocks and not hold them more than a day or two. The brokerage firm said I am now considered a patterned day trader and will restrict letting me buy stocks. They say I need $30,000 to be a daytrader. What is the difference if I make a lot of stock trades or not? Does anyone understand this daytrading rule and why I get to be considered a patterned daytrader just because I made about 3 stock trades a day?

Public Comments

1. It's a trick for them to make money.They think you're addicted to making a lot of moves in the market and think if they ask you you'll make a lot more trades. So they are forcing your hand to make more trades. It's a bad idea to do what they want. They're just greedy.

2. You have been labeled a pattern day trader because you have made 4 "round trip" trades within a 5-day period. The pattern daytrader rule is not your firms rule-it is a rule that all investors must abide by, according to FINRA and the SEC. It is the SEC's designation, and not up to your firm to decide. The only difference here seems to be that while the normal minimum equity for this type of activity is $25,000, your firm is requiring an additional $5,000, which they can do, since this is more strict than the federal requirement.

It is a risk control measure, in part because of the higher amount of buying power that you are receiving-whle you may be very careful with your loss control, and you may make money making day trades, most people do not, especially accounts with lower balances. Inexperienced traders, big and small, tend to hold on to their losers longer, and cash out of their profits too quickly. This activity tends to create an overall drawdown in most active trading accounts. The SEC places this rule in place so that smaller accounts do not end up with negative balances-to ensure that traders have enough equity to cover any losses that have been incurred.

If it is your first time, you should be eligible for a one-time exception. Call them and explain that you were not aware of the rule. It happens all the time. They probably don't want to lose you as a client over this, but they have to follow the rules just like everyone else. You may have to put in a request to the margin department, so be patient and persistant. Good luck trading and remember to keep track of how many you have made, so that this doesn't happen again until you have equity that is above the minimum.

3. Hi i am an employee in a broking firm giving 0.02inttraday and 0.20for delivery and for options we are charging Rs.50(both sides intraday, whereas Rs.100 for delivery)
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