Hi All,
Wanted to get some feedback on having a cash account versus a margin account. My current broker is ThinkOrSwim FYI. Maybe this will be useful for other newbies as well :)
I understand that the PDT rule ONLY applies to margin accounts with your broker and that having a cash account means that you're not able to short stocks (TOS is not great for borrows). However, the benefit of having a margin account means no waiting period for funds to settle and can hold as many stocks as you want o/n with no hits against your PDT rule count. Whereas with a cash account you cannot use your funds until they've settled and that can take days...Example, you have a $3k account and make two $1500 trades back to back means you can't trade AT ALL until those funds settle.
I originally opened my account as a margin account but when I realized that you can't short OTC's and that most of the stocks you can easily borrow are +$10-$15 (with TOS), I decided to switch to a cash account. I am realizing that having the ability to even short one stock that comes on the radar is potentially worth it as opposed to having to wait for funds to settle and not being able to short at all.
What are you guys' thoughts on this? Thank you!
Nolan
I am starting with a small account, between 3K and 5K, and my strategy just starting out is to go for 1 to 3 trades a week, so I think I am going to go with a margin account, because I would rather have the funds available when I see the opportunity than have to wait days for them to clear and hope for another opportunity. This might change as my account size grows, and I might change to a cash account in the future.
Everyone is different and each person has there own special niche type style for trading. All of my accounts are Margin. Got sick of waiting for funds to settle with cash accounts. Having more accounts will give ya more Day trades, the majority of the time I'm not depleting my Day trades. My largest wins percentage is only 6 percent of my trades. I'll make more by focusing in on larger moving plays. Try it.
You could also think of it like this- with a cash account your weekly purchasing power is 6K at most, as I believe it takes 3 days for funds to clear... with a margin account it's 9K, if you were to make 3 trades with 3K. So there is more potential for exponential growth, if you pick the right plays. And I like the idea of multiple brokers, I believe that's what Tim G did when he was just starting out.
@DevastatorX Ya I understand what you mean - I'm not really a fan of trading with the brokers money at this point tho. Only reason I'd consider margin is simply for the shorting ability...
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