Take the 2-minute tour ×
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.

I trade pretty often. Mostly OTC, and $3-$5 range stocks too. I feel like the 3 day settlement date after selling is a really big time delay, and I wanted to get some tips from people, so I can optimally trade and sell everyday. I have around $2000 in my account, if that matters.

share|improve this question
1  
What's the question? –  littleadv Jan 15 '12 at 23:56
    
Yes, please elaborate how the "settlement day always gets in the way"? –  Chris W. Rea Jan 16 '12 at 0:17
    
The three days between the actual "sell" and the cash showing up in his account (settlement) means he has to wait before buying another stock, since he doesn't have cash to cover the buy. –  Adam Jaskiewicz Jan 16 '12 at 2:50
3  
@Adam - not really. You can buy with unsettled funds. There are rules that regulate cases when you buy and sell while the funds are still unsettled, though. –  littleadv Jan 16 '12 at 3:28
    
@littleadv Ah, I guess I haven't tried to sell and then buy that fast without having other cash in there that would have covered the transactions anyway. –  Adam Jaskiewicz Jan 16 '12 at 3:50
add comment

4 Answers

If you are using the same broker for each buy and sell order, then that broker should include any funds from a sale of shares, even if it has not settled yet.

Example, if you currently have $1000 cash in your account and sell $1000 worth of shares on day 1, then on day 2 you should have available $2000 to buy something else. Even though your sell order on day 1 doesn't settle until day 4, your buy order for day 2 will not settle until day 5. So the funds from the sale on day 1 will always settle before your buy order on day 2 settles.

So even though the funds from a sell order cannot be withdrawn from the account until settlement, they should still be available for trading. Check with your broker, as this should be feasable.

share|improve this answer
add comment

Margin account.

the pattern day trader rule applies to margin accounts though that have a balance of less than $25,000. this means that you can't daytrade more than 3 times in a 5 day period. if you break the pattern day trader rule, your account is locked up for 90 days, unless you switch back to a cash account

you only have $2,000 , with a bit more cash (but still under $25,000) you can simply open multiple margin accounts and trade more often, to get around that rule

you can also open up a professional account at any prop firm and trade as much as you like. as the pattern day trader rule only applies to retail margin accounts.

share|improve this answer
add comment

I think the best option is simply keeping enough free cash in your account that you can cover any buy order you want to place before the proceeds of your sell order show up in your account.

One other option that I think would work for this is to use a margin account. You would be putting the other securities in your account up as collateral and borrowing against them. I don't like the idea of using margin accounts to heavily leverage your portfolio, but if you can discipline yourself to not borrow beyond what is on its way into your account from your sold-but-not-settled securities, I don't see a problem with it.

share|improve this answer
add comment

You will want to verify that you have a margin account if you do not already. If not, and you buy with unsettled funds, your broker may deny use of the funds.

share|improve this answer
add comment

protected by John Bensin Sep 9 '13 at 19:53

Thank you for your interest in this question. Because it has attracted low-quality answers, posting an answer now requires 10 reputation on this site.

Would you like to answer one of these unanswered questions instead?

Not the answer you're looking for? Browse other questions tagged or ask your own question.