"free ride" question

[eater]

I bought some share of a stock at $10.45 on Monday. On Wednesday, I sold it at $11.50. Now I want to use the proceeds to buy more shares of that stock at $10.45 again using a limit order. But when I try to place the order, Scottrade warns that I have unsettled funds and placing the order will be considered a free ride under some Federal Regulation T. Not sure what that means. Are there any consequences to placing the order?

[NuTdr]

They are just making sure you have the funds in you account before you make the trade. It takes a day for funds to be settled with ScotTrade. Or at least that is my experience.

[StockJunkie]

Are there any consequences to placing the order?

In this case there are no consequences to placing the limit order, your broker just can't let you.

A lot of brokers have this settling rule where funds have to "settle" before you can trade them again. The best way to get around this is to use strictly limit orders on the buy AND sell side.

Limit orders may take longer to process depending on the price you are seeking but are cleared 10x faster than a regular market order.

[Stocktrading101]

Originally Posted by StockJunkie

In this case there are no consequences to placing the limit order, your broker just can't let you.

A lot of brokers have this settling rule where funds have to "settle" before you can trade them again. The best way to get around this is to use strictly limit orders on the buy AND sell side.

Limit orders may take longer to process depending on the price you are seeking but are cleared 10x faster than a regular market order.

Well said Junkie. I use TD Ameritrade and have day traded numerous times the same capital without it getting tied up for clearance strictly because I used limit orders to buy and sell the stock. With limit orders I have cash that clears up immediately, no time delay at all.