Dumb a** update

I received more details on what I did wrong the other day—in fact enough that I got a form letter saying I couldn’t buy any more stocks for 90 days without going through a trading operator. That would have increased the cost of a trade from below $10 to about $45…not acceptable.

And the infraction was so painfully obvious I can’t believe I didn’t catch it. I guess I was so intent of making sure I got back to positive cash that I didn’t think things through. I had sold some shares two days before the mistake, so the shares had not settled yet. Buying stock with those funds wasn’t the problem—it was then turning around and selling some of the shares I just bought to make sure I had positive cash.

Using unsettled funds to buy and sell shares of the same stock is called freeriding and a big no-no. Fortunately the sum was small and I had not had any problems with my account before now, so they waived the 90-day rule for me.

I mentioned that their website had caught me before from moving into negative cash, which surprised the representative helping me. She said that was the first time she had heard that it had actually worked—usually it doesn’t. She also mentioned that the negative cash position, since it was so small, would not have been nearly as bad as what I did by selling some of the shares I just bought. Also, if I had sold any other stock from my portfolio to cover the negative cash, there would not have been a problem.

Anyway, I pass this information on again, and hopefully it will provide a good example of what NOT to do with your trading account.