Check out our new article in the Knowledge Center today about Day Trade Buying Power
, or DTBP. Unless you're a pattern day trader
, you don't need to worry about DTBP, but pattern day traders really need to understand it! The rules for DTBP are set by the Financial Industry Regulatory Agency and are industry-wide. Here are some key points I think are important to know:
Your DTBP is calculated by multiplying your beginning of day maintenance excess by four.
Once your DTBP is set at the beginning of the trading day, you can only impact it with day trades during that trading day. Making a deposit or selling an overnight position won't impact your DTBP until the following trading day.
If your account is eligible for DTBP, then any trades you place in a given trading day must be within your DTBP. This means that even if you make a deposit and you technically have funds in your account, you may get an "insufficient funds" error message because you don't have enough DTBP available to make a particular trade.
There are two really good examples that illustrate impact to DTBP, so I suggest all you pattern day traders take a look!
DTBP doesn't affect the majority of people here, so for everyone else, here's another good featured article you might enjoy:
Contributions to a traditional IRA may be tax-deductible, so now is a good time for you to read up on IRAs and decide if this type of investment is right for you.