Questions & Answers

Use our "questions and answers" opportunity whereby any reader, no matter where you live in the world, may send in a question by email and receive a personal reply to your question.  We will attempt to respond to every question of a serious nature, time permitting.  Questions and answers that seem to have a special interest to all WorldWideTraders viewers will be posted on our FAQ page so everyone may benefit from the personal interchange.  If you want to participate in this new addition to our web page and have a question that you wish answered, simply click the mailbox and eMail your question.  Time permitting, every question will be individually answered.  Please limit your submission to one question to each eMail limiting the content to 25 words or less.

To ask your question, click the Q & A mailbox.

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Frequently Asked Questions (FAQ)

The Frequently Asked Questions (FAQ) is the place to find answers to your questions about the trading business. What you will find here are answers to questions asked by members over the past few months. Information contained herein is about trading... not specific stocks. This section will be updated with new questions and answers regularly.

Q: How do I learn about WorldWideTraders?

A: Take the WorldWideTraders Tour.

Q: What services are provided by WorldWideTraders?

A:  Too many to count. The easiest way to get a handle on all the benefits is to Take the Tour. Do it now and come back for remainder of FAQ. The Tour was developed in July 2000 and many new benefits have been added since.

Q:  Who are the members of WorldWideTraders?

A:  The members are diverse: experienced, inexperienced; stock traders; futures traders. We have even given it a name. We call it COSMIC: Currencies Options Stocks Metals Index Futures Commodities. WorldWideTraders is made up of every kind of financial markets trader.

Q:  What is the difference between a WorldWideTraders member and a trader who received information by eMail and may access only the public area?

A:  Members have access to daily alerts, the trader manual and the traders' network just to name a few.

Q:  What kind of knowledge do I need to know to become an member of WorldWideTraders?

A:  No trading experience or knowledge is needed.  Members are eligible to ask any questions they wish. 

Q:  What type of person becomes a member of WorldWideTraders?

A:  An interested party who wants to learn trading without mortgaging the farm.

Q:  Who are some of the members of WorldWideTraders?

A:  Members of WorldWideTraders trade COSMIC, commodities, options, stock, metal, index futures and currency.  Some of the best known trading mentors in the business are members of DTU$A:  Author Tony Oz, Dan Gibby of Pristine, Ray Grant - The Ninja, Toni Turner, Fernando Gonzalez, Sammy Chua, Larry Pesavento, Dan Zanger, Dave Floyd Bernard Mitchell and about a thousand individual who are actively trading their own account.

Q: What is chat?

A:   Chat is the conduit that puts traders together regardless of where they reside. There are two main types of chat:  Audio radio broadcast and keyboard entry.  Moscow, Chicago, London, San Francisco Hong Kong, Houston Toronto, New York... you name a major metropolitan area and there will be a member of WorldWideTraders connected by one of the chat networks available throughout the trading profession.

Q:  Does WorldWideTraders provide chat?

A:  WorldWideTraders offers free chat operated by The Ninja.  There are numerous other chat services available at reduce price subscription prices for members.

Q: Who should join WorldWideTraders?

A:  Aspiring traders.

Q: I have forgotten my password. How do I find out how to get into the members area?

A:  eMail Richard to request information.

Q: What should I know about WorldWideTraders Access codes?

A:  Access is case sensitive.  If you use a capitol letter in setup, it must be exact on every entry.

Q: What is an ECN?

A:  Electronic Communication Network are the modern conduit that put buyers and sellers together at lightning speed

Q: What is "Direct Access Trading (DAT)"?

A:  Direct Access enables you direct access from your home computer to the market via more than 8 ECNs the Small Order Execution System (SOES) and SelectNet to execute trades in mere seconds.  

Using an Internet 'discount' broker is most times very costly because the broker sells your "order flow" to market maker, so when you place a market order, the market maker legally shaves a few cents off your trade simultaneous with fulfilling the order.  Internet brokers advertise $9.95 trades but they make it up and more on the back end from order flow sales.  For example:  You order 500 shares of Cisco at 16.18 and get filled at 16.25.  On 500 shares the amount they legally steel from you is 8 cents times 500 shares = $40 so your trade cost $49.95 rather than $9.95 in reality.  Internet brokers are also very slow.  In effect, using their multiple screens that ask you if you are sure you want to do what you are about to do are glorified eMail systems that slow you down so their market maker can shave off that extra. 

Q: Why should a trader use DAT instead of a regular online broker?

A:  For immediate accurate controlled execution of entry and exit... in seconds rather than  minutes.

Many of these questions are answered throughout the site. To find them, taking the tour helps... click Tour.

This is a partial list of questions to which WorldWideTraders has the answers. We are compiling the answers now and will post them soon. Meanwhile, if you need immediate answer to any of these questions, send a message to: WWT@WorldWideTraders.com and we will try to provide an answer within 24 hours.

Q:  Why would I want to learn from you rather than someone else?

Answers:

• In 4 years most students are still aligned with us using rigorous risk management. 

• We are still in contact with all interested students sharing trading ideas regularly.

• We work with students until their trading skill is developed. 

• One on one, hands on mentor counseling type training just works better with students.

• Chart patterns repeat with regularity and the probability of success is predictable. 

• Risk control is the most important factor. 

• You can control only one element in trading, your money. The amount you will risk is paramount. 

Q:   What if I have questions?

• There is always someone available during market hours.

• eMail is answered within 24 hours, at latest

• MSN Instant Messaging keeps us in constant touch during the trading day.

Q:  How much money do I need to trade?

• Trade with only $30,000 dollars... even if you are a millionaire!  With current 4 to 1 margin for pattern day traders, this amount gives you access to $120,000 intraday.  Pay yourself as your account builds!

• Some trades manage trades using options, thus greatly reducing risk capital.

Q:  New Margin rules implemented September 28, 2001!  

A:  Read on...

Q.    What constitutes a day trade under the new margin rules?

A:  A day trade is the purchase and sale or sale and purchase of the same security on the same day in a single account.

Examples of day trades:

q       8/31/01 Buy 500 MSFT and   Sell 500 MSFT

q       8/31/01 Buy 500 MSFT and   Sell 200 MSFT

q       8/31/01 Sell Short 300 MSFT and Buy 300 MSFT

Please note that this definition revises the current interpretation that requires the sale and repurchase of a position held from the previous day to be treated as a day trade.  Going forward, the sale of an existing position that was held overnight will be treated as a liquidation and the subsequent repurchase of that position as the establishment of a new position not subject to the rules affecting day trades.

Q:    What is a Pattern Day Trader?

A:   A client who day trades 4 or more times in 5 business days within a single margin account.

If the day trading activity in a single margin account does not exceed 6% of the client's total trading activity for the 5-day period, the client would not be considered a "Pattern Day Trader".

If a client qualifies as a Pattern Day Trader in a single margin account, that account will be designated as a Day Trade Margin Account.

For Example:

If a client does 4 day trades within 5 business days and also has a total of 100 transactions during that 5 day period, they would not be deemed a Pattern Day Trader since less than 6% of that customer's total trades would have been day trades.  In this instance only 4% of the customers trades would be considered day trades.

Q:   What are the Minimum Equity Requirements for Day Trade Margin Accounts?

A:   An account classified as a “Pattern Day Trader Account” requires a minimum liquidating equity of $25,000.  Your liquidating equity can be found every morning on the bottom section of your comprehensive report found in the client center on our website www.terranovaonline.com. You can also see an example by clicking on the following link: http://www.terranovaonline.com/TNO2001/tno_ClientS/CompReport.asp.    Liquidating equity may differ from margin equity as liquidating equity includes positions with a market value below $5.00, in addition to options positions.

Q:   How do the new margin rule amendments change Day Trading Buying Power (DTBP)?

A:   DTBP for accounts deemed as Pattern Day Traders, is limited to four times the day traders Maintenance Excess.  This calculation is based on the customer’s account positions as of the close of business the previous day.  Maintenance Excess is calculated by subtracting your Margin Maintenance Requirement from your Margin Equity.    The maintenance excess  (DT Excess Equity) figure can be found every morning on the bottom section of your comprehensive report found in the client center on our website www.terranovaonline.com. You can also see an example by clicking on the following link: http://www.terranovaonline.com/TNO2001/tno_ClientS/CompReport.asp

Q:  How do I calculate my Day Trading Buying Power?

A:   Provided the account is not currently in a day trading call, and the account is coded as a pattern day trader, DTBP is calculated by multiplying your maintenance excess times four.  If in a day trading call and coded as a pattern day trader, the DTBP is calculated by multiplying your maintenance excess times 2 on an aggregate basis.   Aggregating trades is defined as taking the total cost of all opening positions in one trading day.

Q:   Where can I find my Maintenance Excess? 

A:    Your maintenance excess (DT Excess Equity) figure can be found every morning on the bottom section of your comprehensive report found in the client center on our website www.terranovaonline.com. You can also see an example by clicking on the following link: http://www.terranovaonline.com/TNO2001/tno_ClientS/CompReport.asp.  In addition, you can also find this figure in your account detail screen within your RealTick software or the positions section within your Investor platform.  If you have any questions locating this figure please do not hesitate to call a Customer Support Representative at 866-866-6546.

Q:   What will happen if my pattern day trade margin account falls below the $25,000 minimum equity balance?

A:   If an account begins the day below the $25,000 minimum and is coded as a pattern day trade account, the account will be restricted to trading one times cash available on an aggregate basis.  In addition, when the account falls below the minimum equity requirement, a minimum equity call is issued.

Q:  What is an equity call?

A:   An Equity Call is generated when your account equity falls below the minimum requirement of $25,000 and you are trading on margin.

Q:   If I do not meet an equity call will my account go on 90-day restriction?

A:   No.  If an account fails to meet an equity call, the account will continue to be restricted to one times cash available on an aggregate basis.

Q:    How do I meet an equity call?

A:   You must deposit either cash or fully paid for, marginable securities with sufficient loan value to bring your account above $25,000.   

Q:   What if I day trade in an account that is below $25,000 that is coded a Pattern Day Trade Account?

A:    You may day trade in a pattern day trade account up to 1 times cash available on an aggregate basis.

                For example:

                                Account comes into the day with $20k = cash available

                                Buy 500 shares of DELL at 20 = $10,000

                                Sell 500 shares of DELL at 20 = $10,000 

                                Buy 400 shares of AAPL at 25 = $10,000

                                Sell 400 shares of AAPL at 25 = $10,000

The aggregate sum of the buys is $20,000.  No trading call was created.  However, if the account were to initiate another purchase or short sale (open an additional position) a day trade call would be created in the amount exceeding the cash available amount.

Q:  If my account is below the $25,000 minimum and I am coded as a Pattern Day Trader, what happens if I liquidate an overnight position and repurchase the same security?  How does that affect my buying power?

A:    Under the new rules, the liquidation of an overnight position will not be counted towards a day trade. 

For Example:  An account with $20,000 equity…

                Day 1:  Buy $40,000 CSCO

                Day 2:  Sell $40,000 CSCO

                Day 2:  Buy $40,000 CSCO

Under this example no day trading call would be created because of same day substitution.  A sell of an overnight position and subsequent buy of the same security on the same days (which does not constitute a day trade) is treated as a same day substitution and the customer can use the proceeds of the sale towards a new purchase.

Q:  What if my pattern day trading margin account falls below the $25,000 minimum equity balance intraday?

A:    If the account is coded as a pattern day trade margin account and drops below the $25,000 minimum intraday but has a liquidating equity above $25,000 by the close of the day, the account will not generate an equity call.

Q:  What happens if I am a Pattern Day Trader and I exceed my Day Trading Buying Power and my account is above $25,000?

A:    If the day trading buying power is exceeded in a pattern day trader account above $25,000, the account will be subject to a day trading call. 

        Example:

A pattern day trader with $50,000 in equity, not currently in a call, purchases $250,000 worth of stock.  A trading call will be generated in the amount of $12,500.   Since not currently in a call, the account would be able to purchase $200,000 worth of stock ($50,000 times 4).  However, the account purchased an additional $50,000 generating a call of $12,500 ($50,000 divided by 4).

Q:    What is a Day Trading Call?

A:   A Day Trading Call is generated when a pattern day trade account above $25,000, exceeds their Buying Power when affecting an opening position, provided the account is not currently in a call.  The amount of the call is equal to 25% of the amount exceeded (see example above).

Q:    How do I meet a Day Trading Call?

A:    You can meet a Day Trading Call by depositing full cash in the amount of the call or fully paid for marginable securities.  Please be aware you cannot liquidate positions to cover a day trading call.

Q:    How many days do I have to meet a Day Trading Call?

A:   Once the call has been generated the customer has to meet the call by trade date plus five business days (T+5). 

For Example:   If a call is created on Monday, the call must be met by the following Monday (assuming no market holidays.)

Q:    What happens to the account during those 5 days that I have to meet the call?

A:   In a Pattern Day Trading Account, the day following the day the call was created, the buying power will be restricted to two times maintenance excess. 

For example:

The call is created on Monday; the account will be limited to two times maintenance excess on Tuesday.

The account will be margined based on the aggregate sum of all opening trades beginning on the trading day after the day trading buying power is exceeded until the earlier of when the call is met or 5 business days.

For example:

Account begins day with $15,000 maintenance excess (Buying Power of $30,000) and
            proceeds to do the following trades:

Buy 300 MSFT @ 50 total cost $15,000

Sell 300 MSFT @ 51 total cost $15,300

Buy 200 AAPL @ 20 total cost $4,000

Buy 300 CSCO @ 15 total cost $4,500

Sell 200 CSCO @ 14 total cost $2,800

The aggregate sum of the above trading activity would be $24,500.  The account will be required to have at least $12,250 in maintenance excess to execute the above trades ($24,500 divided by 2)

Q:       What happens if I do not meet the day trading call within 5 business days?

A:   If a day trading call is not met by T+5, the account is restricted to trading one times cash on hand for 90 days or until the call is met.

          Q:  Once I deposit funds into my account to meet a day trade or equity call, how long before I may withdraw those funds?

         A:  Funds deposited to meet a day trade or equity call must remain in the account for an additional 2 business days before they     may be withdrawn.  Please remember there is a ten-business day hold on all checks deposited into the account.

For example:  Funds wired into the account on Monday are available to be withdrawn on  Thursday, assuming no market holidays. 

         Q:   Are Regulation T calls affected by this change?

           A:  No, rules for covering and calculating Regulation T calls will remain the same.  The reason for this is that the Federal Reserve regulates Regulation T and the Pattern Day Trade rules are changes imposed by the NASD.

         Q:   Has there been a change to Cross Guarantee accounts?

A:   Pattern Day Traders are not permitted to meet day trading margin requirements through the use of cross guarantees.  Each day trading account is required to meet the applicable requirements independently, using only the financial resources available in their account.