I've been investing for a while now, so I know enough for what I do and for what works for me; and if I take a long position I hold it for quite a while, so learning the intricacies of daytrading / frequent trading was not a concern for me. Never paid much attention to T+3 since I have a margin account but I don't use the margin, using it as a cushion to legally circumvent the T+3 limitations.
However recently I have had some decent results paper trading frequently, and I am ready to pull the trigger, but I am puzzled by the T+3 requirements, please follow my logic below and see if I am correct.
SCENARIO 1
- I start with $10,000 in my cash borkerage (no margin)
- Let's say that on Monday (M) I take a $1,000 position on a stock
- Every day my position goes up by 10%
- Every day, I sell yesterday position and re-invest everything in a new position
- No trading fees for the sake of simplicity
So, this is how I see it:
| DAY | CASH @BEGINNING | BUY | GAINS | SELL | CASH @END | CASH FLOW |
|---|---|---|---|---|---|---|
| M | $10,000 | $1,000 | $9,000 | -$1,000 | ||
| Tu | $9,000 | $1,100 | $100 | $1,100 | $7,900 | -$1,100 |
| W | $7,900 | $1,210 | $110 | $1,210 | $6,690 | -$1,210 |
| Th | $6,690 | $1,331 | $121 | $1,331 | $5,359 | -$1,331 |
| F | $5,359 | $1,464 | $133 | $1,464 | $4,995 | -$364 |
| M | $4,995 | $1,611 | $146 | $1,611 | $4,594 | -$401 |
| Tu | $4,594 | $1,772 | $161 | $1,772 | $4,154 | -$441 |
| W | $4,154 | $1,949 | $177 | $1,949 | $3,669 | -$485 |
| Th | $3,669 | $2,144 | $195 | $2,144 | $3,136 | -$533 |
| F | $3,136 | $2,358 | $214 | $2,358 | $2,550 | -$586 |
| M | $2,550 | $2,594 | $236 | $2,594 | $1,905 | -$645 |
| Tu | $1,905 | $2,853 | $259 | $2,853 | $1,195 | -$710 |
| W | $1,195 | $3,138 | $285 | $3,138 | $415 | -$780 |
| Th | $415 | $3,452 | $314 | $3,452 | -$444 | -$859 |
| F | -$444 | $3,797 | $345 | $3,797 | -$1,388 | -$944 |
| M | -$1,388 | $4,177 | $380 | $4,177 | -$2,427 | -$1,039 |
| Tu | -$2,427 | $4,595 | $418 | $4,595 | -$3,570 | -$1,143 |
| W | -$3,570 | $5,054 | $459 | $5,054 | -$4,827 | -$1,257 |
| Th | -$4,827 | $5,560 | $505 | $5,560 | -$6,209 | -$1,383 |
| F | -$6,209 | $6,116 | $556 | $6,116 | -$7,730 | -$1,521 |
| M | -$7,730 | $6,727 | $612 | $6,727 | -$9,403 | -$1,673 |
| Tu | -$9,403 | $7,400 | $673 | $7,400 | -$11,244 | -$1,840 |
| W | -$11,244 | $8,140 | $740 | $8,140 | -$13,268 | -$2,024 |
| Th | -$13,268 | $8,954 | $814 | $8,954 | -$15,495 | -$2,227 |
| F | -$15,495 | $9,850 | $895 | $9,850 | -$17,944 | -$2,449 |
| M | -$17,944 | $10,835 | $985 | $10,835 | -$20,639 | -$2,694 |
| Tu | -$20,639 | $11,918 | $1,083 | $11,918 | -$23,603 | -$2,964 |
| W | -$23,603 | $13,110 | $1,192 | $13,110 | -$26,863 | -$3,260 |
| Th | -$26,863 | $14,421 | $1,311 | $14,421 | -$30,449 | -$3,586 |
| F | -$30,449 | $15,863 | $1,442 | $15,863 | -$34,394 | -$3,945 |
So really. after the initial funding, by being successful I need to continue to deposit enough cash to cover the gains of today + the prior 2 days
SCENARIO 2
Same as above, but with a Margin account; as long as the securities are all marginable and my gains (and therefore buys) are not so big that I go over the margin requirements I should be all set.
Q1.: Do I see this correctly?
Q2.: Am I missing something?
Q3.: Do daytraders have the same issues? Worse?
Submitted March 23, 2017 at 09:12AM by PM_ME_BOOBPIX http://ift.tt/2nGtUNS
