A cash account, the settlement time

Question

I have a question about the way you can trade on a cash account:

I know that if you have lets say a $1,000 account and you buy $1,000 worth of ABC stock and sell them on the same day say Monday from when you bought them, assuming you didn’t gain or lose anything, you wont be able to trade that $1,000 until Thursday so the trading day +2 days

Question:

If I buy $1,000 Worth of ABC on Friday and sell them on the same day, will the funds clear on Monday? will I be able to trade on Monday? Or that doesn’t count as trading days and I wont be able to trade until Friday (trading day) +2 trading days so will I be able to trade again on Wednesday instead?

Answer 1

In the U.S. settlement for equities is T+2 or two business days.

There is no limit to how many day trades you can make in a cash account as long as you use settled funds. If you have $10k of settled cash, you could make one $10k day trade today with or if you want, ten $1k trades. Either way, you cannot trade those funds until two days from now.

The Pattern Day Trader rule applies to day trades in a margin account. If you make more than 3 day trades (options and equities) in a rolling 5 business day period, provided the number of day trades is more than six percent of the total trading activity for that same five day period then you are considered to be a Pattern Day Trader. Then, you must maintain a minimum equity of $25k in a margin account on any day that trades are made and it must be in your account prior to the day trading. If the account drops below $25k, no day trades will be allowed until the account is restored to the $25k minimum equity level.

Per Reg T, a PDT is allowed intraday to trade four times the maintenance margin excess in the account as of the close of business of the previous day but must revert to the standard 50% overnight margin by the end of the current day. Brokers have the right to set more restrictive levels of margin (less than 4:1 intraday margin).