Hi, I'm new to day trading, more of an investor. So forgive this elementary question. So, if you buy and sell something in the same day, do you need sufficient funds to cover the whole buy order? Or just enough to cover brokerage and any money you may have lost on the trade. Much appreciated.
jaeyon
27th-March-2008, 06:23 PM
Hi, I'm new to day trading, more of an investor. So forgive this elementary question. So, if you buy and sell something in the same day, do you need sufficient funds to cover the whole buy order? Or just enough to cover brokerage and any money you may have lost on the trade. Much appreciated.
not 100% sure, but i think the orders and the transactions to follow are on a first come first serve basis. i.e if you place a buy order at 11 and sell at 11:20 on the same day, funds from your bank account are withdrawn at 11am three days later and then deposited 20 minutes later?
malachii
27th-March-2008, 07:19 PM
Depends on your broker. When I used to trade with Sanford they insisted on you having the funds in your account before they would place the order. Comsec don't withdraw the funds from your account for 4 days but this means that if you sell your shares within T+1 then you only need funds in your account to cover brokerage and any loss you made. Hopefully though you have made a profit and this will cover all expenses and a little on the side.
malachii
AnDy62
27th-March-2008, 08:44 PM
Thanks for the replies :) I'm with Comsec so I'm pretty sure that it will be fine, because I noticed on the buy orders, the settlement date doesn't specify the specific time, e.g. 11.38am - so I think it's just the open of business on that day. Could be wrong though ...
CFD
28th-March-2008, 09:34 AM
I'm not too sure of the wisdom of buying more than you can afford to pay for. Just because the funds will not be fully drawn does not mean they should not be available.
julius
28th-March-2008, 10:09 AM
isn't this effectively the same as a CFD ?
stock_man
28th-March-2008, 10:20 AM
Hi AnDy62,
I dabbled in a bit of this trading late last year.
I too am with Comsec. In the Comsec rules regarding settlements, you will find that they do indead follow what malachii stated (T + 1).
I used to buy stock on the first day, then sell on the 2nd day before close.
On settlement day, the difference would be added/taken from my account (+ brokerage!)
Using this it is possible to do your own type of "margin trading".
But be careful, you are trading with money you may not own. If you can not possible sell your stock, you can run into trouble!!
I had this with a stock I purchase, only for it to go into suspend due to its rapid movement... I was stuck holding and could not sell. Had to pull cash from other sources to top up the account before settlement...
But with good discipline and lots of guts (very high risk), this can prove a tradable strategy.
blehgg
28th-March-2008, 10:45 AM
I'm with COMMSEC too.
They do "normally" only take/add the difference, but I've had days where there are discrepancies between the Settlement date and when they actually bank the money. The withdrawl from my account is normally very prompt (as expected) but the deposit is another story.
If your starting out (like I am), I wouldn't be trading with more than I could afford to anyways :P
shares
28th-March-2008, 11:50 AM
They do "normally" only take/add the difference, but I've had days where there are discrepancies between the Settlement date and when they actually bank the money.
T+3 always applies whether you buy or sell stock. BUT, if you buy something, comsec usually pull the money from your account early in the morning (on the T+3 day), and if you sell something, comsec will give you your money late in the day, sometimes even close to midnight (on the T+3 day).
In regards to day trading ...
You do not need any money in your bank account, only brokerage, if you buy and sell within T+1.
Just don't be too greedy when you have profits :p: and be prepared to sell for a slight loss if you feel the stock is just going to fall further
good luck :)
CFD
28th-March-2008, 01:38 PM
isn't this effectively the same as a CFD ?
When I trade using CFDs, I risk 2% of my bank on anyone transaction with a max. of 10% in total. The bank exists and is there to be lost.
footlose
21st-February-2010, 04:27 PM
Hi AnDy62,
I dabbled in a bit of this trading late last year.
I too am with Comsec. In the Comsec rules regarding settlements, you will find that they do indead follow what malachii stated (T + 1).
I used to buy stock on the first day, then sell on the 2nd day before close.
On settlement day, the difference would be added/taken from my account (+ brokerage!)
Using this it is possible to do your own type of "margin trading".
But be careful, you are trading with money you may not own. If you can not possible sell your stock, you can run into trouble!!
I had this with a stock I purchase, only for it to go into suspend due to its rapid movement... I was stuck holding and could not sell. Had to pull cash from other sources to top up the account before settlement...
But with good discipline and lots of guts (very high risk), this can prove a tradable strategy.
Hi Andy, Had problems with day trading before,and it cost me money due to price delays and drop-outs etc.
I decided to open account with a good trading platform with instant share updates,
movements,charts,gaps etc,...not expensive.E.G.(Sonray Trading platform):not pushing or promoting that company) I am having far better results and had no dropouts or getting stuck with shares.
A matter of personal taste but works for me.
wecanallinvest
15th-May-2010, 02:18 PM
This strategy is way too risky - I have tried many times in the past when I first started trading and lost any gains because I had to sell out the following day. I would then often watch the stock rise the day after. You do not want to be a forced seller.
*** If you don't have the cash to invest then don't buy the stock ***
If you have done your homework on a stock and feel you are buying at a good price, it often takes more than 1 day to come good. Short term trading is only effective if you have the cash (the choice) to hold for at least a few days until the market comes positive again on the stock you bought.
newbie trader
15th-May-2010, 03:05 PM
I'm not too sure of the wisdom of buying more than you can afford to pay for. Just because the funds will not be fully drawn does not mean they should not be available.
I agree with that. I would say that psychologically you would be trading differently than if you were using 'your own' funds.
cutz
15th-May-2010, 03:13 PM
I agree with that. I would say that psychologically you would be trading differently than if you were using 'your own' funds.
Incorrect,
It's not about trading differently, any method using no funds potentially could get you into hot water.
What would you do if say you bought a wad of stock which then went into trading halt indefinitely.
DVEOUS
15th-May-2010, 06:50 PM
What would you do if say you bought a wad of stock which then went into trading halt indefinitely.
Like ABC Learning, I can't do anything with?
:banghead:
drsmith
15th-May-2010, 06:54 PM
Like ABC Learning, I can't do anything with?
:banghead:
In the olden days you could have at least used the share certificate as bumf.
Westpac offset if by direct debit so a stock can be held for a couple of days without having to cough up.
It's not incorrect, unless you can show me some evidence to the contrary.
cutz
16th-May-2010, 07:54 PM
It's not incorrect, unless you can show me some evidence to the contrary.
I'm not sure what evidence you're after, have you not heard of trading halts ?
newbie trader
16th-May-2010, 08:33 PM
I'm not sure what evidence you're after, have you not heard of trading halts ?
I was talking about the mindset of 'I have to put 200 into my account to cover this trade' compared with using 10 grand of your own money for instance.
pixel
16th-May-2010, 09:07 PM
Going back to the original question:
I trade through Westpac. They take the current value of my portfolio as security and let me buy on any given day to the total balance of my bank account plus the security in my portfolio.
I'd feel utterly naked if I didn't have a positive bank balance at the end of the day, but buying and selling within a day for more than my bank balance is quite a common occurrence.
Now I'm not advocating this as a routine trading plan. Especially if one is less experienced and has thus a higher risk of "getting it wrong". But if you know what you're doing and have a backup account that lets you cover surprises like the ones mentioned (trading halt, bad report, ...) I can't find anything wrong with it.
SmellyTerror
17th-May-2010, 10:42 AM
What would you do if say you bought a wad of stock which then went into trading halt indefinitely.
That's the issue. Commsec will let you buy a lot of shares with a zero balance, but make sure you can pony up the money if your stock goes into a halt over the T+3 period - or never comes back at all. Don't lose your house...
Remember: you need to plan on doing this trading stuff for a long time. Over a long time, pretty much everything will happen, and that includes holding the bag when a company goes down. Bank on it. Assume it'll happen some day - and maybe on your next trade. Never be in a position where that'll wipe you out.
But more generally: Do you need enough funds to cover your buy order?
Of course not! Welcome to the wonderful world of margin, which is usually more available or cheaper for day trading than for overnight. Just don't go near it until you know what you're doing. And if you're asking this quesiton, you don't. :p: :D
