Still confused on funding

Posted by Thunderbird on October 25, 2009 (07:26AM)

I am new to this trading thing. After researching for several months now, I am still a little confused on account funding. Before I actually dive into trading, I don't want to dive onto a rock and die right off. I am unclear on how the funding machinery works. Let's say, for instance, I want to start out modestly with $1000.

1) First of all, where does it go?

2) Does TK assess any setup fees or other hidden costs that would devalue the original funding?

3) I understand the 5 day wait on the initial deposit for the ACH. Does TK take the entire amount in the bank account, or just the amount I specify they can have? In other words if I have $2500 in the bank, they aren't going to mess with anything over $1000, correct? I assume this is how it works.

4) If I make a successful trade, does the money stay in my account at TK, or is it transferred (in the case of ACH) or disbursed to me via a check or how does that work? Do I have to actually request the transference of any profits I have made or is it automatic?

The bouncing part sounds just like a checkbook; if you are overdrawn, you get penalized. However I have been reading posts in the forums suggesting that money is just disappearing from ACH accounts without explanation. Maybe I am just not reading the posts correctly. I just want to make sure that if I go to the poorhouse, I understand that it's my fault, and that I'm not just getting screwed by unclear calculation.

Any help greatly appreciated.  

Posted by BeretDude on October 25, 2009 (08:24AM)


Thunderbird said: I am new to this trading thing. After researching for several months now, I am still a little confused on account funding. Before I actually dive into trading, I don't want to dive onto a rock and die right off. I am unclear on how the funding machinery works. Let's say, for instance, I want to start out modestly with $1000.

1) First of all, where does it go?

2) Does TK assess any setup fees or other hidden costs that would devalue the original funding?

3) I understand the 5 day wait on the initial deposit for the ACH. Does TK take the entire amount in the bank account, or just the amount I specify they can have? In other words if I have $2500 in the bank, they aren't going to mess with anything over $1000, correct? I assume this is how it works.

4) If I make a successful trade, does the money stay in my account at TK, or is it transferred (in the case of ACH) or disbursed to me via a check or how does that work? Do I have to actually request the transference of any profits I have made or is it automatic?

The bouncing part sounds just like a checkbook; if you are overdrawn, you get penalized. However I have been reading posts in the forums suggesting that money is just disappearing from ACH accounts without explanation. Maybe I am just not reading the posts correctly. I just want to make sure that if I go to the poorhouse, I understand that it's my fault, and that I'm not just getting screwed by unclear calculation.

Any help greatly appreciated.  

1)  The money goes into your trading account. 

2)  No, there are no setup fees or hidden costs... except.. with a TK account, you do NOT want to trade in Penny Stocks... stocks below $1.00.    Especially if you are starting your account with $1.000.   They charge  .01 per share for any stocks you buy under a buck.   So if you bought 1000 shares of a penny stock, they would charge you the normal $4.95 commission charge, plus and additional $10.00 for the shares bought.

3)  Only the amount that you asked to transfer.  In this case, I presume $1,000.

4)  Once a trade you initiated is executed (meaning what you asked to buy, was bought), the money, plus the commission charge is subtracted from your account. You now own stock equal to the amount that you paid for it, minus the commission charge.  You must realize though, that if you sell the stock that you just bought, then the money you would receive for that sale goes into like an escrow account.  It is held for 3 business days.   It still has trading value.. in that you can turn around and buy more with the funds you just received from the last sale, but if you do buy something else with those funds,  you are required to hold that sale until the funds have settled..  3 business days later.   If at a later date, you switch to a Margin account, then things change.  You can actually borrow against your account, but put that thought out of your head for now.   Concentrate on making good investments first.    You don't want to start borrowing money when you are still in the 'learning process'.

Not sure what you meant about the 'bouncing part'?   In a cash account, you can not overdraw.  TK just won't allow it.  You will get warnings in RED if you attempt to do something you can not do.    I personally have not heard of any discussions of people's money disappearing from their ACH accounts.   I suppose the only time that 'might' occur, is if you had a Margin account and were in over your head.

Hope this clears up some of the mystery.   If not, you can also type into the Search box above to find things relative to your questions..  ie   Settled Funds... Unsettled Funds... ACH  transfers....etc.

Happy Trading...  /:)

Posted by TK-Stefan on October 25, 2009 (04:02PM)

Thunderbird,

Also, to follow up on your last question regarding an ACH profile disappearing.... If you have an ACH profile setup on our end it is still possible that your bank will notify us that the account is a non-transaction account. It is also possible that we will not be able to locate the account when attempting to verify it. When this happens the ACH profile would be removed from our end here. Some banks do not allow ACH to be setup or they require that you do a different routing/account number. I hope this helps to clear up any confusion regarding an ACH profile disappearing.

Best regards,

Stefan McVeigh
TradeKing Customer Service

Posted by YoungPunk on October 25, 2009 (06:22PM)

Woah I didn't no this, to reclarify:

If i sell off stock A, i can buy stock B immediately but can't resell stock B for 3 days from the initial sell of stock A. That sucks. I'm not a day trader, but if i see a chance for profit, i'd rather sell then wait and gamble it'll go higher.

Posted by David Dusseault on October 26, 2009 (08:23AM)

YoungPunk,

The scenario you describe only applies to certain trading situations and also is applicable at all brokerage houses. Specifically if you are in a cash account and the only cash you have to purchase stock B is from the sale of stock A. Stock trades settle (clear) 3 business days after the trade date under Regulation T of the Securities and Exchange Act of 1934. This rule does not apply to margin accounts if you are interested in trading unsettled funds you should submit a margin account form. You can download this form from the Apps & Forms page on the Services Tab.

Option trades settle in 1 business day after the trade date under Regulation T of the Securities and Exchange Act of 1934. If you sell a contract purchased with the funds from another sale which was not settled (prior to the next business day after the sale) in a cash account it is a violation of SEC rules. This rule does not apply to margin accounts. If you are interested in trading unsettled funds you should submit a margin account form. You can download this form from the Apps & Forms page on the Services Tab.

Let us know if you have further questions.

Thanks,
David Dusseault
VP, Brokerage Operations and Customer Service

Posted by TampaJake on October 26, 2009 (09:48AM)

YP, in my early days here at TK I traded with unsettled funds and sold the stock I bought within the 3 day waiting period. The consequences are not pleasant. Your commission per trade goes from $4.95 to $24.95 for ninety days and there is nothing you can do about it because it is an SEC rule from what I am told. The only way to get around it is to change brokerages, but TK also has a $50 fee to close an account. I waited the time frame out and reduced my trading for the ninety day period.

I like TK, and this is the only negative experience I have had while trading here.

Posted by TampaJake on October 26, 2009 (09:50AM)

YP, the moral of the story is - don't buy with unsettled funds. Wait for the funds to clear. There is no lack of opportunites out there.

Posted by David Dusseault on October 27, 2009 (08:19AM)

TJ and YP -

The $50 closing fee only applies to IRA accounts and is a standard fee (sometimes more) for qualified (IRA) accounts at all firms due to the extra maintenance (IRS reporting, Custodian fees, etc) that come along with holding and terminating an IRA.

Thanks,
Dave Dusseault
VP, Brokerage Operations and Customer Service
TradeKing

Posted by Thunderbird on October 29, 2009 (09:06AM)

Thanks, guys, for all the help. I will take all the advice I can beg and absorb..

Posted by irishneal11 on October 29, 2009 (09:37AM)

Good Morning Thunderbird:

Funding with ACH is pretty straightforward.  When you request an ACH deposit we pull the amount of cash you instruct from your bank account.  The funds are then placed into your TradeKing account where they take 5 business days to clear. ACHs will always show as uncleared deposits for 5 business days after posting.  This does not prevent you from using the funds in most cases if the ACH is for less then your total account value.  Cases in which you would likely not be able to use the funds are for the purchase of penny stocks, or other volatile stocks.  ACH transfers like personal checks are not guaranteed funds.  For this reason we require the 5 business day hold on the all initial ACH transfers.  This is a risk management policy which is common in the financial industry.  Not sure what you are referring to regarding ACHs disappearing, I assure you that does not occur.  The only time those funds would be removed from your account is if the bank should request they returned due to an insufficient balance in your bank account.  If that occurs, the funds are returned to your bank and a $20 bounced ACH fee is charged.

Regards
Neal Atkins - Manager E-Communications - TradeKing

Posted by Thunderbird on October 30, 2009 (01:44PM)

irishneal11 said:

Good Morning Thunderbird:

Funding with ACH is pretty straightforward.  When you request an ACH deposit we pull the amount of cash you instruct from your bank account.  The funds are then placed into your TradeKing account where they take 5 business days to clear. ACHs will always show as uncleared deposits for 5 business days after posting.  This does not prevent you from using the funds in most cases if the ACH is for less then your total account value.  Cases in which you would likely not be able to use the funds are for the purchase of penny stocks, or other volatile stocks.  ACH transfers like personal checks are not guaranteed funds.  For this reason we require the 5 business day hold on the all initial ACH transfers.  This is a risk management policy which is common in the financial industry.  Not sure what you are referring to regarding ACHs disappearing, I assure you that does not occur.  The only time those funds would be removed from your account is if the bank should request they returned due to an insufficient balance in your bank account.  If that occurs, the funds are returned to your bank and a $20 bounced ACH fee is charged.

Regards
Neal Atkins - Manager E-Communications - TradeKing

 Thank you, sir. I think I'm pretty much understanding it now. Seems to me the best way is just to send you a cashier's check, although it may not be most convenient, it certainly appears more accurate and less confusing.

Posted by coach on November 06, 2009 (09:36AM)

curious as to whether a brokerage account can be set for direct deposit directly from payroll..............................similiar to the way you can split your paycheck to be allocated across various checking accounts; can a small portion be directly routed straight into a brokerage account instead of the intermediate step of the bank and then an ach from the bank acct?

Posted by Thunderbird on November 07, 2009 (01:15AM)

coach said: curious as to whether a brokerage account can be set for direct deposit directly from payroll..............................similiar to the way you can split your paycheck to be allocated across various checking accounts; can a small portion be directly routed straight into a brokerage account instead of the intermediate step of the bank and then an ach from the bank acct?

 That would be VERY cool! A continuous supply of cash into the account every payday. Like tahey say, "you don't miss it if you never saw it."

Posted by TampaJake on November 07, 2009 (12:06PM)

David Dusseault said: TJ and YP -

The $50 closing fee only applies to IRA accounts and is a standard fee (sometimes more) for qualified (IRA) accounts at all firms due to the extra maintenance (IRS reporting, Custodian fees, etc) that come along with holding and terminating an IRA.

Thanks,
Dave Dusseault
VP, Brokerage Operations and Customer Service
TradeKing

 Mine was an IRA account. Thanks for the clarification.

Posted by TK-Stefan on November 08, 2009 (06:49PM)

Coach,

Here at TradeKing it would not be possible to setup direct deposit from your paycheck. However, what can be setup is a periodic deposit through ACH. The form to set this up can be found while logged into your account by going to Services > Apps + Forms > ACH. After filling out the form you can fax or scan and email it to us. The fax number is 866-699-0563 and our email address is Service@TradeKing.com . While this isn't a perfect solution to your original question it would be one way to automatically have funds deposited into your TradeKing account.

Best regards,

Stefan McVeigh
TradeKing Customer Support

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