Do I need a day trader account if I need to buy at today's close and sell at tomorrow's close everyday?
I am working on an algorithm for swing trading where I buy at the close today and sell at the close tomorrow. It worked well in the simulations that I ran but I would like to test it in the real world. I'm trying to use as little money as possible since this is beta testing. To start a day trading account, sites like Lightspeed ask for a minimum of 25,000$. Is a day trading account really necessary for this type of trade? If not what account should I choose?
P.S. I'm a non-US resident so the sites that I can use are brokers like Interactive Brokers and Lightspeed.
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Not to nitpick but there is no such thing as a day trading account. It's either a Cash Account or a Margin Account. If you choose to day trade, each type of account has its own requirements/limitations for such trading.
In the US, a Pattern Day Trader (PDT) is someone who executes more than 3 day trades (options and equities) in a rolling 5 business day period in a margin account, provided the number of day trades is more than six percent of the total trading activity for that same five day period.
A PDT must maintain a minimum equity of k in a margin account on any day that trades are made and must be in the account prior to the day trading. If the account drops below k, no day trades will be allowed until the account is restored to the k minimum equity level.
Day trading is defined as the buying and selling of a security within a single trading day. If you are buying at close today and selling at the close tomorrow then you are NOT day trading.
Practically speaking, a minimum of k is needed to open an account but you need a bit more because A PDT must maintain a minimum equity of k on any day that trades are made. It must be in the account prior to the day trading. If the account falls below ,000, the PDT will not be permitted to day trade until the account is restored to the ,000 minimum equity level.
Very simply, without a margin account, you cannot sell tomorrow what you bought today, because it hasn't settled yet.
So unless your pattern works with three days delay, you will need a margin account (which comes with the minimum cash requirements)
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