Potential breakage of day trading regulations?
Summary of the user’s problem and solutions discussed:
- Main Problem: The user, PokestarFan, is concerned about potentially violating day trading regulations after making small trades with settled cash in their account.
- Solution 1: Fidelity representatives clarified that if trading is strictly in a cash account, the user will not be subject to Pattern Day Trader (PDT) requirements, as long as they do not exceed settled cash limits or receive any warning messages before trading.
- Solution 2: The user is advised to check their account for any trade restrictions or violations by navigating to the “Balances” tab and reviewing the “Trade Restrictions & Violations” section.
- Solution 3: Fidelity representatives recommended being attentive to any warning messages that may arise before placing trades and provided resources for avoiding cash account trading violations.
Here’s the full thread
Good morning, I have $200 in an account and $25 inside of FXAIX, all other balance is in my core position. Today, I saw a penny stock and decided to make some small bets (I had no more than 16 dollars in the stock at any given moment) and got slightly lucky. Did I break the day trading regulations?
I am not a Fidelity representative in any capactiy, but did you sell thoes shares before the cash was settled?
I started with settled cash
like 50 dollars of settled cash
and spent 20 from there
Hey, @PokestarFan. Sorry for the delayed response, I didn’t refresh Discord and didn’t get the new post notification until now. Happy to help here.
If you’re trading strictly in a cash account. You will not be subject to PDT requirements. However, remember that trading in a cash account is subject to cash trading rules, and violating these industry rules can result in your account being restricted. You can check out the article below for a more thorough explanation of these cash trading rules and how to avoid them.
Avoiding cash account trading violations: https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations
You can check the number of violations you’ve incurred, if any, by navigating to the “Balances” tab, then clicking “Trade Restrictions & Violations” at the bottom of the page.
For a little more context, a day trade is defined as an opening trade followed by a closing trade in the same security on the same day in a Margin account. The opening trade must precede the closing trade to be considered a day trade, and the same day includes pre-market, regular session, and after-hours sessions. Please note that day trades are tracked by the number of opening orders closed on the same day (intraday).
Day Trading: https://www.fidelity.com/learning-center/trading-investing/trading/day-trading
For a bit more clarification, you would only receive a Pattern Day Trader (PDT) designation after placing 4-day trades in type-margin within a 5 business day period or if you have 2 unmet day trade calls within 90 days in a margin-enabled account. If such trades are placed in type-cash, you will not be labeled a Pattern Day Trader. If you decide to trade in type-cash, you do not need the minimum $25,000 account balance required as a PDT.
Trading on margin: Pattern day trading rules (Video): https://www.fidelity.com/learning-center/trading-investing/trading/pattern-day-trading-video
Margin FAQs: https://www.fidelity.com/trading/faqs-margin
Margin trading entails greater risk, including, but not limited to, risk of loss and incurrence of margin interest debt, and is not suitable for all investors. Please assess your financial circumstances and risk tolerance before trading on margin. If the market value of the securities in your margin account declines, you may be required to deposit more money or securities in order to maintain your line of credit. If you are unable to do so, Fidelity may be required to sell all or a portion of your pledged assets. Margin credit is extended by National Financial Services, Member NYSE, SIPC.
I know this was a ton of info, so please let us know if you have any follow-up questions! 🟢
I have margin disabled on the account, so I didn’t break the rules then right?
I’m happy to clarify here.
So long as you did not exceed your settled cash total or encounter any warning messages before placing the trade, you did not break any rules.
Yea there was no warning messages
When I first started buying it would warn about non settled cash or whatever
Like
Other stocks
A few days ago
But it didn’t do that this time
Just make sure that you’re paying attention to any warning messages that may come up before you place a trade. The link that @FidelityEmilio posted above that dives into avoiding cash account trading violations is an excellent resource to use if you come across any warning messages prior to placing a trade. You can also reach out to us anytime! We’re happy to provide any clarification you need.