A:

There are two likely reasons why a customer would be unable to buy and sell a stock in the same trading day. For simplicity's sake, let's assume that you are trying to sell a stock that you own and buy a different stock that you wish to own, and that the account in which the securities are held is an unregistered, 100% cash, personal brokerage account that is restricted to all-long positions.

The most likely explanation for your situation is that your online brokerage will not let you day trade in your account due to your level of experience as a trader. Here is how the NASD defines day trading:

"For purposes of this rule, the term 'day-trading strategy' means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities."

The other possibility is that the account does allow day trading, but it has a number of restrictions set up to prevent you from doing serious damage to your financial situation by over trading without understanding the risks involved. If you are a first-time investor, we can assume that your account has a number of restrictions on it that prevent you from investing in illiquid securities, extremely volatile securities, and so on. Because of the fee structures and complex regulations involved, brokerage accounts are usually set up with restrictions for beginner investors. Customers can ask to have these restrictions removed from their accounts. Depending on the brokerage firm and the customer's financial situation, the restrictions may be removed or loosened at the customer's request or after a given number of trades have been made.

If you continue to find your brokerage account too restrictive, you may want to shop around. Some online brokers are less restrictive on account activities than others. Depending on the brokerage, day trading can be defined as anything from making more than one trade in a day, to buying and selling the same stock in a day. Investigating your brokerage's policy on this matter may lead you to seek another online broker with less trading restrictions.

For further reading, see 10 Things To Consider Before Selecting An Online Broker, Choosing A Compatible Broker and Day Trading: An Introduction.

RELATED FAQS
  1. Do I always need to use a stock broker?

    Do I need a stock broker to buy stocks for myself, even if I get a stock brokers license? Or is there a rule that makes it ... Read Answer >>
  2. It's my first time investing and I would like to know whether to choose margin or ...

  3. My broker just sold securities out of my account without my permission. Is this legal?

    Your broker's actions are not legal unless he or she sold the securities under certain conditions. Let's look at the two ... Read Answer >>
  4. Can you short sell stocks that are trading below $5? My broker says that I can't.

    Short selling can be very risky for both the investor and the broker. Brokers will often tell investors that only stocks ... Read Answer >>
  5. I have only $500 to invest, am I limited to buying only penny stocks?

    No, you are not required to invest only in penny stocks - investors are generally not restricted to a certain kind of stock ... Read Answer >>
  6. What are restricted shares?

    Understand what a restricted share is. Learn why a company would issue restricted shares to employees and why an employee ... Read Answer >>
Related Articles
  1. Managing Wealth

    What's a Brokerage Account?

    A brokerage account is a contractual arrangement between an investor and a licensed securities broker or brokerage.
  2. Trading

    10 Tips For Choosing An Online Broker

    This important investment decision happens before you pick your first stock. Find out how to get it right.
  3. Investing

    Short Selling: What Is Short Selling?

    Investopedia Explains: The fundamentals of short selling and the difference between going long or short on an investment.
  4. Investing

    Opening Your First Brokerage Account

    Learn what steps you should take before you open your first brokerage account.
  5. Trading

    Pick the Right Brokerage Account for Options Trading

    Follow these steps to pick the right options brokerage account depending on your trading needs and style of trading.
  6. ETFs & Mutual Funds

    The 4 Ways To Buy And Sell Securities

    Know the four main avenues of buying and selling investment instruments.
  7. Managing Wealth

    Start Investing With Only $1,000

    Find out what fees and restrictions need to be considered before investing $1,000.
  8. Trading

    Introduction to Margin Accounts

    Find out what your broker is doing with your securities when you invest on margin.
  9. Managing Wealth

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  10. Trading

    Is Your Broker Acting In Your Best Interest?

    Learn the clues you'll need to determine whether you've chosen a reputable professional.
RELATED TERMS
  1. Brokerage Account

    An arrangement between an investor and a licensed brokerage firm ...
  2. Restricted Cash

    Monies earmarked for a specific purpose and therefore not available ...
  3. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  4. Cash Account

    A regular brokerage account in which the customer is required ...
  5. Restricted Stock

    Insider holdings that are under some other kind of sales restriction. ...
  6. Firm Order

    1. A market order to buy or sell a security for a brokerage's ...
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center