Of course, you can buy and sell a stock that same day. It is known as day trading. But there are certain conditions you must meet. Read to get more information.
Meaning of Day Trading
Day trading involves buying and selling of stocks within a single day. You can buy and sell as many times as you want, but a broker must approve your account for day trading before you can commence trading.
What would happen if my account isn’t approved for day trading?
The Security and Exchange Commission would flag you as “pattern trader” which may force your broker to restrict your account. Seeking approval to become a day trader is one of the rules of the commission.
Conditions that qualifies you for day trading
Your margin account must have at least $25,000 before you can be allowed to day trade. And it would remain as your minimum balance. The margin account can be opened with as little as $5000, but you cannot go below the $25,000 minimum when you day trade. You must have this amount in your account before you can think of seeking approval to commence day trading.
Pattern Day Trader
Though it is best to get approval before you think of day trading, some investors meet the criteria to sell their stock as a pattern day-trader. For instance, Michael bought stock after which he discovered the performance will not be as expected. He can go ahead and sell it at the end of the day.
What you need to know about buying and selling stocks the same day
- You need a margin account
- Your account should have a minimum balance of at least $25,000.
- Your minimum balance must not be less than $25,000 otherwise you may likely receive a margin call from your broker – A call to deposit funds within five working days.
- You need a broker’s approval to become a day trader.