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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade
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To: Dominick who wrote (2050)2/11/2000 4:59:00 PM
From: Dan Duchardt  Read Replies (2) of 2120
 
Dominick,

I don't know what the problem is either, but I have been trying to find out without much success. I have read Regulation T front to back, and I see nothing that prohibits daytrading in a cash account.

However, we also hear about "free-riding" when one purchases stock in a day that exceeds the cash account equity. "Same day" settlement may not be sufficient to allow unlimited buying, even if you are selling to raise the cash to buy again. It seems to me the issue may be one of accounting: If you do accounting intra-day, then you would think unlimited buying and selling should be allowed, at least by Regulation T. If accounting is done once per day, then the free-riding restriction at least seems plausible.

I have a feeling though that Regulation T is not the governing "rule" on this issue. There might very well be an SEC or exchange rule that prohibits "pattern daytrading" in a cash account. If there is, I'd like to find it.

Dan
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