re: Delete

quote:

---

Thanks! I spoke to E*trade and they said something about a Good Faith Violation – A good faith violation takes place when you purchase a security with cash that has not yet settled, and then you sell that security before the proceeds to cover the purchase have settled.

Which is what I’m assuming you’re saying about settled funds? They said they could turn it into a margin account if I sent in some financial info but I don’t think I want to do that. I think I may just try to “week-trade” with only settled funds.

---

Exactly. Settled cash is all the cash in your account that exists because it has been there at least two business days. So if for example, you had $100K of settled cash in your account. If you bought $60K of an equity using settled cash, you now have $40K settled cash to trade with. If you sold all of the shares all at once of the equity (that were worth $60K when you bought them) a week later and they are now worth $80K, at that instance you would have $40K settled cash and $80K unsettled cash in that account. If you purchased $100K of an equity before the 2nd business day it would be purchased with $40K settled cash and $60K unsettled cash. If you tried to sell more than $40K of the $100K of the equity you just purchased before the morning of the 2nd business day, then you have a Good Faith Violation.

So pay attention if you purchase any equities with unsettled cash, and if you did, make sure you don't sell them before the market opens on the 2nd business day after you purchased the equity with unsettled cash.

If you are trading a lot, it's hard to keep up with Settled cash in your accounts. You need to be able to see live in your E*Trade accounts how much settled cash you can trade with. Hopefully they showed you how to quickly navigate to see the settled cash totals in each account so you don't violate that. I believe Fidelity even has a warning message now if I accidentally were going to incur a Good Faith Violation on a Sell order. E*Trade likely has a similar warning message.

Over the years I probably had several Good Faith violations because I traded a lot at a time when Fidelity had no warning message. Fidelity would call me each time I had a violation to let me know what I did, but there was no action taken against me since I only made the mistake few and far between and was not a habitual offender.