dknoonan
27 posts
msg #116278
- Ignore dknoonan |
10/27/2013 4:31:24 PM
When I trade with IRA money, after I sell, I need to keep the money in cash in my IRA for 3 days for "settlement." I think this means that If the average length of my trades is 3 days, I can only be trading with HALF my capital.
Conclusion: I should focus on a trading system where the average trade more like 3 weeks instead of 3 days.
Am I understanding this correctly? Thanks for your inputs...
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dknoonan
27 posts
msg #116279
- Ignore dknoonan |
10/27/2013 5:18:30 PM
After posting this I noticed a thread that says Interactivebrokers.com allows you to trade within an IRA without the 3 day settlement. Is anyone doing that?
http://www.stockfetcher.com/forums/Filter-Exchange/HOW-TO-DESIGN-A-SYSTEM-NOT-JUST-A-FILTER/101013/70
About having all your capital active, is the following statement generally true?
You have 2 trading system A and B. If you have all your capital trading all the days of the year, A makes you 10% and B makes you 20%. Now if you trade B such that it is in cash for half of the trading days of the year, it will yield the same profit as if you traded A every day of the year.
If that is true, backtesting is probably a little deceptive to newcomers like myself. SF backtest keeps you 100% invested without so much as a pause. This might be real difficult to do in real life.
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Kevin_in_GA
4,599 posts
msg #116280
- Ignore Kevin_in_GA |
10/27/2013 5:45:51 PM
Actually you can enter a new trade immediately after selling the current trade, BUT you then cannot sell that trade for at least three days. Just find a system that holds for 5-6 days on average with a reasonable frequency of trade opportunities.
Or treat it like an investment account rather than a trading account - in other words use it for long term capital growth and get a second smaller account specifically for trading (without the settlement limitation).
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evo34
82 posts
msg #116282
- Ignore evo34
modified |
10/27/2013 10:14:14 PM
Kevin, I'm not following what you are saying. There is no minimum hold time for a stock you buy in an IRA. There is a three day settle time after a sale. So if you are fully invested (100% of account value is long stocks/ETFs), and then sell a portion of your holdings, you cannot make any purchases until the cash clears (3 days after your sale).
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Kevin_in_GA
4,599 posts
msg #116294
- Ignore Kevin_in_GA |
10/28/2013 11:19:16 AM
What I'm saying is that you can enter a new trade the same day you close a previous trade, but you then cannot CLOSE THE NEW TRADE until the monies from the prior sale are "settled" (3 days). At least this is how my self-directed brokerage within my 401k works. It might be different for others.
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dangreene
229 posts
msg #116295
- Ignore dangreene |
10/28/2013 11:39:18 AM
FYI - - - The following is how Scottrade explains it.
Unsettled proceeds from existing long positions can be used to purchase additional securities as long as the new purchase is not sold prior to the settlement date of the original sale that generated the proceeds used to finance the purchase.
If it is sold prior to the settlement date of the funding sale without additional funds being deposited, it will be considered a free ride under Federal Reserve Regulation T.
For example, if you sell a security on Monday the 1st, you can use the proceeds to make a purchase prior to the settlement date of Thursday the 4th. However, if you make a purchase before Thursday the 4th then sell that new position before the settlement of Monday's sale, you will then be required to deposit funds to pay for the purchase. If you purchase on Thursday the 4th, you may place a sell order at any time you wish, because the purchase was made with settled funds.
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