Full question:
QUESTION IS ABOUT DAY TRADING- BOUGHT 50 SHARES OF XYZ 5-13- SOLD 50 SHARES OF XYZ ON 5-14- BOUGHT 50 SHARES OF XYZ ON 5-14. IS THIS A DAY TRADE? NEED EXPLICIT LEGAL DEFINITION WITH REFERENCES TO WRITTEN LEGAL DOCUMENTS.
- Category: Corporations
- Subcategory: Stock
- Date:
- State: Indiana
Answer:
Day trading typically occurs on the same trading day. Day trading (and trading in general) is the buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price.
The SEC (the US securities and exchange commission) has imposed restrictions on the day trading of US stocks and stock markets. The restrictions prevent what the SEC calls pattern day trading of US stocks unless the trader has deposited at least $25,000 into their trading account. As this is not usually the case for most beginning day traders, this effectively prevents the US stock markets from being day traded.
The SEC defines a day trade as any trade that is opened and closed within the same trading day. They define pattern day trading as 4 or more day trades within 5 trading days. This means that even one trade per day would classify the trader as a pattern day trader, and the restrictions would then apply.
If a trader is classified as a pattern day trader according to the SEC definition, and the trader does not have the required $25,000 deposit, their trading account will be frozen for 90 days. Once this happens, the trader will either have to deposit enough equity to bring their trading account up to the $25,000 limit, or wait until the 90 day hold has expired.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
