One of the great things about trading stock that makes it exciting is buying a stock in the morning and seeing it skyrocket allowing you to sell in the afternoon for a good profit. Hey, that is what it is all about right? Just the kind of stocks we are looking for.
However, a beginner must beware for he is likely not going to know that he is limited to 3 such trades in any 5 business day period if he has a cash account. We all start with a cash account. We transfer so much money from our bank into our account at our online brokerage firm and this is called a cash account. To make more than 3 such trades of the kind I am speaking of in any 5 business day period violates the rules.
People who do this kind of trading on a regular basis doing more than 3 such trades in a 5 business day period are called “day traders” and there are special requirements for those who do that.
You got ,000 to put into a “margin account?” I did not think so so just beware of this rule.
What you can do and what I did last week as a beginner was buy on a Monday and sell on a Wednesday. As long as you do not buy and sell in the same day it is not considered a day trade. However, even in my case you are dealing with something called “settlement dates” which I was unaware of at the time. You need to read up on that topic as well. They kind of go hand in hand at least to an extent.
My purpose in writing is not to teach you about these matters but simply to tell you what I have run into as a true novice who had no idea in the world what he was doing or getting himself into. I have survived. You will too so do not let fear get the best of you if you would like to give it a shot.
I am telling you what you need to look into before starting out (I learned afterward and I have survived so I know you will). Use your Google or Yahoo search engine, type in the words “day trader” and also check out “settlement dates,” read what you find, and you will be far ahead of where I was as I began and I might add safer as a result.
