Stock Trading and Other Things

Do you have to wait for 3 days for a trade to settle before trading on a cash account.?

I know you don't have to wait for the 3 day settlement rule on a margin account, but how about a cash account? I heard some online brokers let you do it on a cash account. I don't like margin accounts because I don't want the temptation of burrowing money, but I still want to sell a stock and use the funds to buy another stock right away. I use www.zecco.com
Oh, I also wish to sell a stock that I just bought like if it goes up the next day.

Public Comments

1. It looks like a LOT of people are confused about margin rules at Zecco
http://www.zecco.com/forums/I-am-confuse-with-margin-and-cash-account-47619_1.aspx

here ya go:

Cash Account vs. Margin Account: What's the Difference?
http://www.fool.com/investing/brokerage/cash-account-vs-margin-account-whats-the-differenc.aspx

Trading - Brokerage Account Types
http://invest-faq.com/cbc/trade-broker-accts.html

Understand How Margin Works
http://www.sec.gov/investor/pubs/margin.htm

2. In a cash account, you can immediately use the proceeds from one sale, to purchase another stock, but you can't sell the new stock for three days.

The basic idea is that you can't sell a stock that you do not officially own, and until the first stock sale settles, you do not officially own the second stock, because you purchased them with unsettled funds.

So no, you do not need to wait three days to purchase more stocks, but you do need to wait three days to sell it.

If you do sell a stock that you purchased using unsettled funds, before the three days are up, then you are freeloading, which is against SEC regulations. Your broker is required to freeze your account for 90 days. Which means that you can still trade, but you cannot purchase stock with unsettled funds. All sales will have to be settled, before you can use those funds again.

It is simplest just to get a margin account. If you don't have enough self control to keep from using the margin, then perhaps you shouldn't be trading stocks. A lot of stock trading is about self control.

3. The law reads "up to a maximum of three days" for settlement. Most brokers go to the max. Not all. Some semi-profesional brokers catering to day and swing traders (with years of experiance) have one day settlement rules... which allow for "limited margin" in IRA accounts for next day use of cash. In a regular account.... making it Margin is the best way to go. That doesn't mean you have to trade more than you own... it simply gives you more flexability.

Good luck with zecco, It was rated dead last by Barron's last year. I guess you get what you pay for.