Hello, I am trying to fully understand how many business days after a day trade is the trade cleared.
(ie. If I make a full round trip trade on Jan 12, 2020, is that day trade included in the 5 business day settlement…like would the trade be cleared at the end of the business day of (Jan 18th, 2020) or (Jan 19th, 2020)
To help also clarify what I am asking… If I made a day trade on Jan 12th, 2020 and another on Jan 19th, 2020…would that count as 1 day trade cause the other settled? or two? Thank you
Trades of US equities have what is termed T+2 settlement time. So, if a stock is sold on Monday, two trading days later, on Wednesday, proceeds will be credited to one’s account. Trades on Friday will settle the following Tuesday. This is the current industry standard (before 2017 it was T+3) and not specific to any broker. However, this doesn’t exactly apply to Alpaca accounts.
All Alpaca accounts are margin accounts and are extended credit to cover the ‘float’ between the time one sells a security and when they can use the funds. For practical purposes the settlement time is T+0. One can trade assuming they have immediate access to funds from sales and, conversely, are immediately debited for any purchases. The only times the settlement date may be relevant is for certain corporate actions (eg receiving dividends or applying a stock split) or determining when cash can be withdrawn from an account.
Settlement time is completely separate from day trade rules. To be a day trade, a buy order needs to fill followed by a sell order in the same day (for a short position it would be a sell then buy). The key is 1) it’s determined by the fill date and not the order submit date and 2) the orders occurred on the same date as of US market time which is Eastern or New York time. A buy made during market hours followed by a sell of the same security in after hours trading counts as a day trade because they were both on the same date. This is independent of when the orders actually settle.
So, the question “If I made a day trade on Jan 12th, 2020 and another on Jan 19th, 2020…would that count as 1 day trade cause the other settled? or two?”. First, those are not realistic dates. Jan 12th, 2020 was a Saturday. But that aside, those would count as two day trades. Each one stands on it’s own.
What might be the confusion is the FINRA “3 day trades in 5 days” rule. This simply states that an account will be considered as “Pattern Day Trader” if one makes more than 3 day trades in a rolling 5 day window (only trading days are counted). Again, that’s independent of settlement dates. Also, note if one make more than one day trade in a single day those count as multiple day trades. If one buys, then sells, then buys, then sells, the same stock in a single day that is considered two day trades and count against the 3 max.
Hello thank you for the response. I meant to put Jan 12th, 2021, Jan 18th, 2021 and Jan 19th 2021. Part of the reason why I also asked this question is because in between these dates is a Federal Holiday (Jan 18th) in which the market was closed.
Normally when I use Alpaca API for day trading tracking it takes into account all my day trades and refreshes when they are settled, however I do not believe the API response for “day trades” takes into account Federal Holidays. Is this true?
You are probably referring to the account attribute daytrade_count? That value is independent of settle time as mentioned. It simply keeps track of the quantity of day trades over the past 5 trading days. This excludes any days that the markets were closed so yes it takes into account holidays.
Note this value is real time. You can verify that by checking the value of ‘Day Trade Count’ in the ‘Balances’ tab on the web portal. Execute a buy and, immediately after it fills, execute a sell. Go back to the balances tab and the ‘Day Trade Count’ will have incremented. Try it in paper trading if you don’t want to actually execute a test order.
BTW, I’m still putting 2020 on my checks so completely relate to the date confusion.
@kie13 You asked “The funds from the sale that we can use immediately, is it our money or a loan from the broker?”. In a typical cash account, proceeds from a sale take 2 business days to settle and are credited to the account when settled. In an Alpaca margin account, proceeds are credited to the account immediately. Behind the scenes, in the account database, a field called cash is incremented. Is that a loan? I’ll leave that to you to decide, It’s simply a matter of when cash is credited. There are no interest charges.