The system is I have 5000 to start and have been playing virtual stock (day-trading) for about a year. I return generally 10-20% per day. So set-up a cash account where I utilize on day 1 only 1000 of the 5000 in the account.

ok.... so I make a buy 100 shares of a stock at 10.00 per share. It goes up to 10.50 per share and I sell..... so now I have 1050 showing available for use, or do I in reality? In real stock trading isn't the reconciliation of the account in limbo for 3 days until it is settled before I can make another buy or can I immediately trade on that same day?

In all my past virtual stock trading games I generally would make on average 100-120 trades per day. Of these 80% make profit enough to cover the charge per trade (10.00) and still make money, 10% on average I sell with .02% in loss and the other 10% loss are still under .2%

However, in the virtual games/training I can make unlimited buys and sells until the money is basically gone that day. In real life I make a buy 1000, I make a sell 1050.... can I now make an immediate buy or do I have to wait three days before making another buy? As long as I show a cash balance after buy and sell as tracked by the trading house, shouldn't I be able to make unlimited buys and sells throughout the day , as long as it is a cash account and not on margin?

  • It's not unlimited -- you need to carry a minimum amount of equity in order to make additional purchases. The brokerage will have detailed rules about day trading equity requirements and margin. – Rocky Mar 14 '15 at 16:35
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    Making 10%/day on average is great, until you lose 100% in one day. – JTP - Apologise to Monica Mar 14 '15 at 18:42
  • @CharlesE.Grant - why would one be losing money every day after taxes? If you make 20% profit and your tax rate is 50%, then you still make 10% profit after tax. Your comment is incorrect. – Victor Mar 15 '15 at 11:46
  • @CharlesE.Grant - how do you know that the 20% profit does not already include fees. When I calculate the profit or loss for one of my trades it is always the profit or loss after deducting all fees. In fact the OP states that in his virtual trading his profitable trades make enough to cover the charges per trade and make money on top of that. – Victor Mar 15 '15 at 20:17
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    What country are you in? Please edit your answer and place a country tag. – Victor Mar 15 '15 at 20:40

No, you cannot.

The cash settlement period will lock up your cash depending on the product you trade. Three business days for stocks, 1 business day for options, and you would need waaaaaay more than $5,000 to trade futures.

  • In Australia with my broker I am able to trade straight away with the funds from the sale of any stocks I make, because both trades will get settled in 3 business days, so the funds would be available for the new purchase. – Victor Mar 15 '15 at 11:41

According to Regulation T, you can make as many day trade (round trip) stock purchases using a cash account as long as you have the funds to cover each and every round trip sale. However, the funds generated from the sales cannot be used again to purchase new stocks until the settlement period (T-2 or T-3) is over.

For example, say you have $10000 dollars in your cash account and no securities. You buy 1000 shares of XYZ stock in the morning at one dollar per share and you sell the stock 30 minutes later because it went up say by 50 cents.

According to Regulation T, you cannot use the money generated from the sale of your 1000 shares until after the settlement date. However, you can use the remaining $9000 dollars in your account to execute other trades just as the first trade. You can do this as many times as you want as long as you have funds available to pay for the transaction the same day it's executed.

The only thing to worry about and that isn't clear, is, what happens if you perform this action more than 3 times in a week? Does it mean that your cash account now becomes a margin account subject to margin account rules because you executed more than three round trip trades in a five day rolling period?

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