Day Trading...understanding The Rules
Power Moves for The Day Trader
Power Moves for The Day TraderTo understand the concept of day trading power, you must know a few other key facts first. Most people who trade online have some kind of understanding about the differences between the styles of trading. First of all, if you are buying and selling any asset in a short term manner, you are a trader, not an investor. Many traders are also investors. There are basically two kinds of traders, although that is sometimes up for debate, day traders and swing traders. Many so-called experts lump all online traders into the bag of day trading. For the sophisticated observer it is plain to see the obvious differences. A day trader rides the rush of the asset, while a swing trader diagnosis the trends and holds onto it as long as the momentum last.
Day trading power is the limit of the amount of these trades that can be done by an individual trader, which also includes a minimum amount of trades that can be transacted per day. You must also be aware of The Securities Exchange Commission, and all rules concerning day trading. A day trader must function under certain regulations which include minimum equity requirements for a day trader account, as the day trade buying power of that account and what defines a trader as a day trader.
Once a trading account has been designated as a day trader account, you must calculate the day trading power of that account. That formula is fairly complex, and I highly recommend that, as with all online investing, you seek professional guidance. There are many ways to get help with this information, with a minimal cash outlay.
For Those of You Math Wizards Here Is the Formula
Figures Are Based on the Previous Day's Closing Prices
4X Maintenance Excess = DTBP.
For those of you currently scratching your head, you must also figure what maintenance excess as well. That calculation is:
Total Positions + Total Cash = Total Equity
Total Equity-Non-Margin Positions= Margin Equity
Margin Equity-Maintenance Requirement= Maintenance Excess
Along with figuring DTBP and knowing what makes a trade account a day trader account, you must understand the minimum equity requirements for such an account. Most brokerages require a fairly substantial amount of twenty to thirty thousand to set up your account. If your day trading account goes below that minimum equity requirement, you will be issued a "call" to bring it up too minimum, if not, your trades left in the account can be liquidated. Your day trading power can only remain operational if you maintain your minimum equity requirement and your trading activity remains within the set limits.
You Also Need Proper Training and Tools
Without correct and through training and the right kind of software to trade on, you can very easily lose your investment. To be affective the platform should meet at least a minimum of three qualifications.
1. It must be able to offer live streaming technical data. (Otherwise the program is merely educational)
2 Visually it has to be large enough for all the data to be seen easily. (Many of the online brokerages technical data is too small to be useful)
3. It must be cost effective. (Most good systems can be purchased for between one and two hundred dollars)
Today you have the advantage of, for one thing, reading this article. For another, you have immediate access to hundreds of software packages that dont cost an arm and a leg.
I dont profess to being an expert, but I do know of some. I obviously dont have the time to go into all the details now, but at my site
Market Mentalist you will find all you need to know about investing online. There is an abundance of up to date articles and product information on Day Trading...Understanding the Rules. There is also access to some of the top trading systems available including software, books, newsletters, and Forums. Whether you are an inquisitive novice or a seasoned pro Market Mentalist offers the online investment resource you just might be seeking.
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