There are times when you want to buy and sell stocks in your Ally Invest account and notice that your account is restricted. There are specific reasons why that happened to your Ally Invest account.
Your Ally account is restricted because deposits are sent to the DTCC (Depository Trust & Clearing Corporation) for processing and, at the same time, monitored till clearance is gotten from the transfer agent. Another reason is if you engage in day trading, because Ally Invest does not support day-trading unless you maintain at least $25,000 in account equity.
This article will take a detailed look at what it means if your account is restricted. I will also discuss minimum account equity, day-trading power, and how to avoid the issue of your Ally account being restricted.
So let’s get started.
What does it mean if your Ally account is restricted?
A restricted Ally account is an account with insufficient equity to fulfill the initial margin prerequisite that is restricted from trading until the minimum account equity requirement is met. Furthermore, a restricted account is also held until clearance is gotten from the transfer agent after deposits are sent to the DTCC for processing. It is essential to know that restricted accounts can not buy or sell stocks until the equity level is met.
A restricted account is referred to as a blocked account.
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What is minimum account equity?
Due to the fact that Ally Invest doesn’t support day trading, once you perform four or more stock day-trades in a margin account in a five-business-day period, you are seen as a Pattern Day Trader in the company.
Also, if you engage in Pattern Day Trading, you are required to maintain at least $25,000 in account equity to continue day-trading. But once you fail to meet this requirement, you won’t be allowed to day trade in your account.
It is essential to note that you won’t be permitted to open and close positions on the same business day until the next business day to avoid further restrictions.
Despite these restrictions, it is still possible to trade on margin (if you maintain the minimum required amount of $2000 in account equity) and use the day-trading buying power.
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What is day-trading buying power?
You can utilize the day trading buying power if you meet or exceed the minimum equity requirement, equal to the equity in your account at the end of the previous business day. Nonetheless, if you use funds that exceed your account’s day-trading buying power and then close those positions on the same business day, it will lead to a Day-Trading Call. As an Ally Invest customer, you have just five business days to meet the Day Trading Call by depositing cash or securities into your free account. Failure to do so results in your account being restricted.
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Pattern day-trading rules on Ally Invest
You need to know that can only use day-trading buying power within the day (intraday). Here are rules you need to know concerning pattern day-trading on Ally Invest:
- Stocks or marginalized securities traded using day trading buying power must be closed by the end of the market on the same day.
- Even after market closure, it is still possible to trade if the value of your marginalized securities or stocks doesn’t surpass your buying power.
- Exceeding your day trading power leads to a ‘Day Trading Call.’ And you have to meet the requirements of the Day Trading Call before you can engage in Day Trading.
Violating these rules may lead to a ninety-day restriction being placed on your account, and you won’t be able to trade online.
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Compatibility with FDIC Insured Deposit account
You need to know that immediately you are seen as a pattern day trader on Ally Invest, you won’t be able to hold excess funds in the FDIC Insured Deposit account. However, you won’t be able to use the FDIC Insured Deposit account from your Ally Invest account. But you can register the account with other Money Market Products.
What do you need to do to avoid your account being restricted?
Day-trading is regarded as risky, according to Ally Invest. Also, day-trading is not suited for someone with limited funds or resources. These are reasons why Ally Invest doesn’t support it except if you maintain at least $25,000 in account equity.
So, if you are a day-trader and want to prevent your account from being restricted at Ally Invest, you need to ensure you always maintain the $25,000 equity requirement.
Also, in the case where your account gets restricted, you need to fulfill the account equity requirement.
Can you have multiple Ally Invest accounts?
You can open as many Ally Invest accounts as possible. Having more than one account may help you achieve several of your trading goals. It could also be beneficial if your account exceeds the limit insured by the FDIC, which is capped at $250,000 per deposit account. This implies that if you have more than that amount in one of your accounts, you can move your excess funds to another account at a different FDIC financial institution to protect your funds.
As I told you earlier, your Ally Invest account can be restricted if you engage in day trading. Also, Ally Invest does not support day-trading except you maintain at least $25,000 in account equity. It is also limited because deposits are sent to the DTCC (Depository Trust & Clearing Corporation) for processing and, at the same time, monitored till clearance is gotten from the transfer agent.
However, you can avoid the restriction if you don’t day trade constantly. Ally Invest doesn’t support day-trading. And if you must day-trade, then you need to maintain at least $25,000 in account equity.
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