Don't hesitate to tell us about a ticker we should know about! Context and insight must be provided; empty posts or empty posts with links will be automatically removed. Posts regarding this topic will be automatically removed. What is a 90 day restriction under federal securities regulation?? I am new to trading and I've recently traded some stocks on etrade.

After purchasing my second stock I received a dailog box stating what I said in the title of this post. I called etrade and asked what exactly it meant. I was told that I have to wait 3 trading days until I own the stock and if I trade before the 3 days I will be put on the restriction.

So I always have to wait 3 days until I can trade the stock again? What are my limitations if I get the 90 day restriction? Could someone further explain this? The rules are different for cash accounts and margin accounts, I don't know what you're using Basically, if you have a cash account While it may seem like you own the security right after you purchase it, the SEC says the transaction doesn't complete until 3 days after the date of purchase.

So if you buy it on monday, your funds don't settle until thursday. So you cannot sell the security until thursday, or else you are slapped with the 90 day suspension period I believe.

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For a margin account, however, it's different You get 3 round trips With a margin account, you can sell the security before the settlement date, meaning you can buy and sell in the same day before the funds are actually settled 3 days after the purchase date.

You only get to do this 3 times though, until this same restriction is applied to your account. Thank you for the detailed response. It's making more sense now. So the same thing applies to day traders? Margin is the only way to avoid the 3 day settlement. That's the way day traders do it. Yes and you need 25k in your account to have no restrictions.

I've read that options however only have a 1 day settlement.

What is a 90 day restriction under federal securities regulation?? : stocks

What happens if I've a stop triggering within these 3 days? Will it trigger at all? Will it be free ride?

Cash account I don't know. I don't know why everyone doesn't just set up their shit as a margin account. You can buy a security and sell it that same day if you want. What gets you the Regulation T violation is if you sell a security without having enough settled funds in the account to cover the purchase. For example you can sell security X and use those unsettled funds to buy security Y right away with no problem.

You'll get a violation if you sell security Y before the funds from the sale of security X settle. Here's another situation that can violate you. You buy security X with settled funds and then sell it before 3 business days. That's fine to do but you can't purchase security Y before the first transaction settles. A probably oversimplified way to think of Reg T is that you can't execute 3 trades in a row before the first one settles. I stand corrected a little bit. With a cash account you can buy and sell a security in the same day without having to wait for settlement from the purchase With a margin account, I think the most sensible way to think of the regulation, is you get 3 round trip trades within 5 days.

You can use the unsettled funds to purchase another security because you're on margin, but cannot exceed these 3 round trips. Regulation T doesn't even apply to margin accounts.

Since you're buying on credit, it doesn't matter if you have enough cash on the settlement date. You're probably thinking of the pattern day trade regulation which is separate from Reg T. As far as I know, if you're not actually closing out your positions the same day you open them you won't be flagged so swing trades should be unaffected.

Free riding also known as Freeriding or Free-riding is a term used in the stock-trading world to describe the practice of buying shares or other securities without actually having the capital to cover the trade.

Free riding - Wikipedia

This is possible when recently bought or sold shares are unsettled , and therefore have not been paid for. Since stock transactions usually settle after three business days, a crafty trader can buy a stock and sell it the following day or the same day , without ever having sufficient funds in the account.

Freeriding Free rider problem Freeride. Will delete on comment score of -1 or less. FAQs Magic Words flag a glitch. Here's a bit from linked Wikipedia article about Free riding:.

This is possible when recently bought or sold shares are unsettled, and therefore have not been paid for. There is a case been filed against you in Reddit's court. Funds take 3 days to settle per each trade unless you're on margin. So while it may seem like you instantly get cash when you trade, there is a 3 day delay. The 90 day restriction is exactly what it sounds like - you can't trade for 90 days.

Wrong, the restriction is that you cant buy or sell shares with cash that hasn't settled yet. Op shouldn't feel too bad, I've gotten three since I started trading. Convert the account to a margin account.

Ok, so switching to a margin account sounds more reasonable. Also there is only a 90 day restriction on the cash that was used to purchase the trade. If I decide to use more cadh by transfering more, I than can use the other cash?

You can at least with my broker buy securities and sell them before the 3 days is up.

However, you cannot use those funds from the sale to buy other securities until the 3 days is up settlement date. Use of this site constitutes acceptance of our User Agreement and Privacy Policy. By signing up, you agree to our Terms and that you have read our Privacy Policy and Content Policy.

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Are old books like "The Intelligent Investor" or "Why Stocks Go Up and Down" out of date? Past and Modern day stocks.

I put 10k into a couple tech stocks, it's performing well, would like to migrate more of my portfolio into it, what should I do? This is an archived post. You won't be able to vote or comment. So you cannot sell the security until thursday, or else you are slapped with the 90 day suspension period I believe For a margin account, however, it's different You get 3 round trips I would assume it would still sell, but they might try and lock your account for the 90 days.

You can always call your broker and talk to someone who can give u a definite answer. YOU ARE A COPYCAT!

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