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Margin Trading FAQs



  • What should I know about the risks of Margin Trading?

    Trading on margin involves leverage and allows you to extend your financial reach by investing borrowed funds while limiting how much of your own cash you expend. For this reason trading on margin carries a higher degree of risk and losses could exceed the principal invested. Please be sure to review our margin disclosure for full details about TradeKing's policies.
  • I just bought a security in my MARGIN account. How soon can I sell it?

    By having a margin account with at least $2000 in account value, you may bypass the settlement rules cash accounts must follow. However there may be restrictions to how frequently you can open and close positions in your account on the same day (day trading) depending on your account value. The below FAQ will cover this rule.
  • How often can I make day trades in my MARGIN account?

    Margin accounts will either have the ability to make day trades on an unlimited basis or they will be limited to a maximum of three day trades within any consecutive five business day period. Determining which rule you can follow depends upon the value of your account and whether or not your account has been labeled as a pattern day trading account.
  • What is a Day Trade and what is a pattern day trader?

    A day trade occurs when you open and then close the same stock or option position on the same business day. For example, you purchase 100 shares of MSFT at 10am on Tuesday and then sell 100 shares of MSFT at 3pm on Tuesday; that is considered a day trade. It is also a day trade if you were to sell short and then buy to cover the same stock in the same day. Finally any trades executed during the Pre & Post market will also count towards a day trade on the date of execution. Any position held overnight will not be considered as part of a day trade.

    Pattern day trading is a coding that is added to any margin account once that account makes more than three day trades within any consecutive five business day period. Once labeled, the pattern day trader account may continue to make day trades only if that account begins the day with $25,000 or more in account equity (stock value + cash). Should a pattern day trading account begin the day under the required $25,000 in account equity, no day trading will be permitted. Should a day trade need to be made, a broker can assist with that trade over the phone.

    Please note that placing a day trade while the account is under $25,000 will result in a day trade call being issued for the total amount of the trade and may result in account closure. If you would like to read more about pattern day trading, please review our day trading disclosure which also has additional links about day trading.
  • Are there any additional resources that explain margin and pattern day trading?

    In addition to our article titled "What is day trading?", we have two videos on our site which cover margin and pattern day trading. One is "Margin: What you need to know" and the other is "Day Trading Rules". There is also additional day trading information available through FINRA's website.
  • My account was labeled as a Pattern Day Trading account. Can this be removed?

    Although Pattern Day Trading (PDT) activity and its subsequent coding for qualified accounts are mandated by FINRA, TradeKing is able to grant a one-time courtesy in lifting a PDT designation 90 days after its initial coding. It is important to note, however, that if the account becomes labeled for Pattern Day Trading again, the designation will become permanent.
  • How do I add or remove margin?

    The easiest way to set up your account for margin is to apply online. You can do so under My Accounts > Settings > Margin/Option Level. Keep in mind, under Federal rules there is a $2000 minimum equity requirement to be eligible for margin. If your balance is below $2000 your account has to be treated as a cash account even if approved for margin.

    Removing margin can be done by contacting us via telephone at 877-495-5464 or by sending TradeKing a signed and dated letter of request with instructions to remove margin. This letter should include your name, date and account number. Your letter can be faxed to 866-699-0563, emailed to service@tradeking.com, or uploaded in the forms section of the website while logged into your TradeKing account.

    Please note that if you were labeled as a pattern day trader and removed margin previously, the pattern day trader designation will remain in effect if margin is reinstated on the account.