The 25k pattern day trader requirement is only applicable if you have a margin account. Not applicable to cash accounts. The regulation looks at the total liquidation value of your account including all cash, stocks, and any other positions in the account. A margin account is flagged as a pattern day trading account if they have executed 4 or more round trips within a rolling 5 business day period. These details are the regulatory requirement, individual brokerages may impose more restrictive house requirements on their clients but what I mentioned above is minimum. If an account is flagged as a pattern day trading account and is under the 25k minimum requirement and the client executes a round trip the account must be restricted to liquidating transactions only for 90 days. In some cases the account holder can attest to not being a pattern day trader and have the flag removed one time for the life of the account. Also of note, day trading 25k minimum is based of the start of day balance of the account.
THERE IS NO RULE THAT REQUIRES DAY TRADERS TO HAVE $25000 IN THEIR ACCOUNT, what you and others are confused about is the SEC rule for Pattern traders which states that pattern traders must have a minimum equity of $25,000 in their account at all times. This is not a balance of $25,000 but a minimum equity
Some brokerage firms may require account that do excessive trades over a given period of time to have additional equity in their accounts
Equity = market value of the positions less any debit balance.
Your account equity at the beginning of the day must be $25,000.00. Any day that your equity has dropped before $25,000, you can not day trade.
NOTE: This only applies once you have been designated a pattern day trader. If you are only making the occasional day trade those restrictions do not apply.
Your balance available for trading would include your borrowing capability.
Actually, you don't need to have $25000 balance for day trading. It is all depend on which stock brokerage you choose. You can start doing the with $1000 in some online stock brokerages.
Here is a list of online stock brokerage, choose the one with low commission and low minimum balance requirement:
http://www.financejourney.com/best-onlin...
Hope this help you.
Does the $25,000 mean available balance for trade? Or does that include my current positions on stocks that adds up to $25,000?
