Sunday, January 19, 2020

What is a Pattern Day Trader?

Intraday trading can be a good way to shore up your income. But if you’re engaging in intraday trading for beginners, it’s important to get a clear picture of how it all works.

Day traders in the United States (US), for example, are familiar with the term ‘pattern day trader’. This is a regulatory designation introduced by the Financial Industry Regulatory Authority (FINRA) in the US to prevent individuals from trading excessively. This is important because pattern day traders engage in margin trading—that is, they borrow money from the broker to carry out trades through their margin account.

Whether you are interested in online share trading or trading other kinds of securities, it helps to understand the basics of margin trading. A closer look at the characteristics of pattern day traders could provide some insights in this regard.

Pattern day trader: The basics

A stock market trader who carries out four (or more) day trades within a period of five consecutive business days is termed a pattern day trader, provided certain conditions are met:

  • The day trades are carried out through a margin account and positions are never held overnight.
  • The day trades represent over 6% of the total trading activity in the margin account over the five-day period.

NASD Rule 2520 outlines the regulations pertaining to day traders.

Curbs on pattern day traders

FINRA has placed certain checks on pattern day traders to reduce the risks inherent in intraday trading. The main restrictions are listed below:

Minimum account balance: Pattern day traders are obliged to maintain a minimum balance of USD 25,000 in their trading accounts. The amount does not have to be wholly in cash though. It could be a combination of cash and stock holdings.

If the balance dips below USD 25,000, the trader will not be allowed to carry out any trades. 

Margin call: At times, the broker may place a margin call. The broker does this to alert the trader that the account balance has dropped below the minimum limit. This may occur if, for example, the value of some stock holdings in the trader’s account falls below a certain level.

Upon receiving a margin call, the trader will have to address the issue within five business days. Trading will be restricted to twice the maintenance margin until the account balance threshold is met.

If the trader does not respond within five business days, the broker may place restrictions on the trading account. For instance, the trader may be relegated to a cash-restricted status for up to 90 days. This means the trader will have to carry out all trades using cash. No trading on margin will be permitted.

These restrictions are set down by FINRA. However, some brokerage firms may have more stringent rules in place.

Why are these curbs necessary?

An essential aspect of the pattern day trader is that they trade through a margin account. In other words, they use the money borrowed from the broker to execute trades. Trading with borrowed money naturally carries a degree of risk.

As a pattern trader, you get a margin of 25%. This means the broker will lend you 75% of the cost of securities as you trade. In contrast, standard traders are permitted to borrow only around 50%. The margin advantage is provided to pattern day traders because they close their positions before the markets close for the day. So, the broker ends up lending money for a shorter time.

Summing up

Margin trading, as you’ve seen in the case of pattern day traders, is a big part of online share trading. But when it comes to intraday trading for beginners, it is advisable to start small and keep your borrowings manageable. It may help to open an account with a brokerage like Kotak Securities that offers portfolio tracking tools and extensive educational resources. With some practice, making the right day trading decisions should come easily to you.

Saturday, January 18, 2020

Considering Refinancing? Here’s How to Know When You Should

Good financial management means more than just watching every penny. It also means taking an occasional step back and looking at the big picture in the context of the world around you. An area where many people find a way to save money is by refinancing their homes. 

Here are four ways to know that it’s time to look into refinancing.

Market Rates are Better

Interest rates are almost always in motion, headed either up or down most of the time. At the time of your last refinance or the initial purchase, you may have taken a rate that was pretty solid. Since then, though, rates may have dropped, and a refinance could save you thousands of dollars in interest.

Your Credit Has Improved

One of the most important factors in the interest rate you get is your credit score. Over time, you should be able to see that figure gets better and better. Once you’ve reached a significantly better credit score, you will probably qualify for a better rate, making it worth your while to refinance. 

A home buying loan service can review your situation and see if there may be options for you.

Your Situation Has Changed

Since you took out your current mortgage, you may have encountered many changes. You could have had a job change that resulted in a lower salary, making your mortgage a bit of a strain. You may have experienced marriage, divorce, or the arrival of children. Each of these events can change your financial needs and make it beneficial to investigate refinancing.

You Need Cash Out

Your home is not just your residence. It’s also an investment. The dollars you put into it can someday come out if needed, even if it’s for upgrading the house itself. During a refinance, you can cash out some of your equity to take care of other expenses, such as tuition for the kids, debt consolidation, or even just a great family vacation. Instead of racking up student loans or credit card debt, look into a refinance that will cover the expenses.

When you think about it, very few mortgages should ever go the full term without being refinanced at least once. Changing interest rates and personal needs are a given when you’re considering a time horizon of up to 30 years. Check your situation periodically and be prepared to refinance when the right circumstances develop. You could easily save yourself thousands of dollars in interest.

Friday, January 17, 2020

How to Be Financially Smart With Your Tax Refund

We should be proud of the long-term success when we look back at our finance progress. One should think of spending tax refunds in pleasurable but profitable ways that will relatively give you happiness at some point when we look back. Think about it.

Instead of spending that cash infusion in a way that leaves your finances neutral or even worse off, here are several ways Tax Refund smartly leaves you better off if you want to gain some real momentum with your finances.

1. First of all, pay off high-interest debt

One of the biggest hurdles to overcome if you want to build wealth is High-interest debt. Just remember that it is difficult to get ahead when so much of your payment goes to interest-only if you owe money on credit cards or carry personal loans with high-interest rates. But use your tax refund to repay this debt, you would save yourself almost four years of monthly minimum payments, and monstrous interest payments.

2. Emergency fund savings

Experts have suggested that people should stock an emergency fund with at least three to six months of expenses, even a smaller amount is a good place to start in case of any emergency, so as not to blame one’s self when the bills come. Build an emergency fund is exceptionally essential for your financial health whether you carry some high-interest debt or live a debt-free lifestyle. 

You’re prone to struggle if you face unexpected financial emergencies without an emergency fund such as unexpected home repairs expenses and all the significant unforeseen bills that you can think of. Consider adding your tax refund to the pot if you have a savings account.

3. HAS Contribution –Health Savings Account Contribution

Once you open a health savings account (HSA) which is a tax-advantaged saving account set up specifically to pay for healthcare cost, you’ll be able to deduct contributions up to a certain limit, watch your money grow tax-free, then use your funds for qualified healthcare expenses on a tax-free basis. You can withdraw funds for several purposes if you don’t use up your HSA funds by the time you turn 65, --even to pay for retirement.

4. Self-Investment

Let me remind you that you’re your own greatest asset, so if you receive enough cash in your tax refund to invest in anything, spending that money to improve yourself. And as we may have it, there are several ways you could decide to invest to upgrade your status towards a better income. 

Pursue professional skills or a type of certification that adds values to you. Bear in mind that any investment you make in yourself will likely pay off in the short term and throughout your life and career.

5. Initiate several savings buckets

Starting several different savings accounts can be a smart move if you have competing financial goals and want to save for all of them. Also, commit to weekly or monthly contributions after you might have spread your tax refund across several accounts. You may want to save up for a newer car or update your kitchen. Learn to give yourself a head start toward achieving everything you desire by growing different savings buckets.

Now, it’s up to you to put your tax refund to good use whether it’s a huge or small amount. Also, if you can’t wait to get the money you need, you can always try and to get a cash advance on tax refund. Just make sure that you do your research before making any financial decision!

Factors to Consider When Sourcing Funds for Business

The need to thrive personally and professionally requires a certain level of resource infusion to keep a business going. With reasons varying from expansion to financing recurrent projects, there are many different ways of financing a business. Taking a line of credit and seeking investments are some of the most common methods of business financing.

The two forms of financing have their own benefits and challenges, which is why critical analysis is required to determine the better-suited option. Below are factors to consider before choosing an appropriate source of funds.

Terms of Financing

The contents of your written agreement can determine the decision on where to seek financing. Simple Path Financial and other lending avenues detail the amount, time, and rate of recouping the loan in their loan agreement. Creditors usually have standardized terms for all clients accessing their services, unlike investors who are likely to dictate their own terms.

Associated Costs

Before settling on a mode of financing, you should consider the associated costs and risks. Different financial sources require different commitments and concessions to be made in exchange for a loan. Your business and personal risk factors affect the level of concessions, which lenders and investors adjust accordingly.

Some associated costs are in the form of interest rates, restrictions in the loan agreement for a line of credit, and concessions in the form of control and stock options for investors.

Reason for Financing

The amount and purpose for the finances in the first place should play an integral part in determining the mode of financing. Seeking out investors is better suited for financing capital expenditure projects while lending is more suitable for revenue expenditure.

The different sources of finances have their various advantages and limitation. Besides financing through credit or investors, your business can opt for alternative ways of financing projects, such as stock-piling of in-house reserves and liquidation of dispensable assets.

Tuesday, January 14, 2020

4 Common Energy Drains on Your Home During Winter Weather

Everyone dreads the utility bills when winter arrives. Many things cause bills to increase during this time. We talk about four ways you can minimize the increase in your winter energy costs below.

Heat loss through the windows

Single pane windows cost homeowners the most energy. These windows average $800 to $875 a year in energy costs. Upgrading to dual pane units or windows with Low-E coatings can reduce these figures to lower than $600 annually. In a few short years, these windows can pay for themselves when shoppers are savvy looking for discounts and rebates from the government.

The air conditioning and the furnace fight each other

When you have problems with your HVAC unit, sometimes the only way to get the energy costs down is by hiring someone who specializes in air conditioner repair or furnace tune-ups. These systems must operate in efficient states to keep costs low. Without regular checkups and maintenance, large house systems can increase utility costs exponentially. 

Sometimes, winter weather is not predictable. It may be 80 degrees one week and freezing temperatures the next. If you have to keep switching between the furnace and the air conditioner, then these units can cost a lot of money when you run both in the same month.

Leaving doors open too long

When the weather is not too cold, we often open the doors when watching for guests to arrive or to bring in the groceries. These little moments may not seem like much, but they can let a lot of heat out the door. 

Then, the furnace has to kick on more often to keep the temperature even. Closing the door behind you every time you go in or out can be a pain, but it will save money in the long run.

Using a water heater that is too small for the home

If you have three or four people in your home, then a 40 to 60-gallon water heater is appropriate. Anything smaller, and the system will be running constantly. Keeping the water in the tank warm means the system must constantly work to keep up with the demand. When you do a lot of dishes or laundry, then the energy costs increase.

To minimize the energy leakage from your home during the coldest months, it is important to button up your house and maintain your major home systems. Efficient machinery costs much less to operate than equipment that is outdated or working too hard. 

Insulating the windows and doors and using a Smart thermostat are other ways you can reduce the expense of maintaining your home in the winter.

Friday, January 10, 2020

5 Factors That Can Influence Your Business Loan Approval

If you are heading a large business needing expansion of a particular section, or a small business owner wanting to scale, or a budding entrepreneur, your priority is to secure funds at the right time. We want to focus on the term ‘right time’ because if a financial institution is unable to disburse funds at the right time, you may lose out on a lucrative opportunity.

Now that you understand the significance of timely disbursal of loans, you need to ensure preparedness during the business loan application process. No one wants a loan application rejection as it will lead.

Let’s say that your organization is ready for new business loans, but you are unsure about the subsequent process, this article can get you covered. Here is a list of five factors that influence your business loan approval. Read this to know

Factors that Influence on Business Loan Approval:

A Healthy Credit Score/History:

The most basic and obvious factor for a successful loan application is a high credit score. Financial experts suggest that it is essential for a business owner to keep the personal credit score as high as possible. When it comes to small business loans, financial institutions take into consideration the personal credit score of the business owner. 

The borrowers with a credit score of 720 or higher get better interest rates. Alternate lenders or NBFCs try to fill in the void created by financial institutions by providing new business loans to borrowers with a credit score as low as 500. Hence, small business owners with low credit scores prefer private NBFCs for ease & speed of funding. 

However, good credit history is always a prerequisite for easing out the approval of new business loans. Timely payment of dues, transparent transactions, invoicing of every purchase with dealers are something that can help you build a good credit history.

Age of Business:

Occasionally, banks & NBFCs see the age of business, cash flow, statement of transactions, and other factors in approving your business loan. For small business owners, the APR or annual percentage rate is usually higher. 

Once your financial partners can see some traction in your business, they will follow up with better interest rates. However, many private lenders specifically provide small business loans. All you have to do is to gauge your requirements using a business loan calculator.


Financial institutions reduce lending risk by asking small business owners to use their assets as collateral to secure the business loan. Not being too rigid, lenders allow small businesses to use their stock, equipment, and similar business assets as collateral. Alternatively, institutions like NBFCs offer collateral-free small business loans as well.

Type of Business:

The type of business plays an impending factor in your loan application. If your financial partner considers your kind of business to be riskier, then things may get slower, with financial institutions charging higher interest. Complete market research about the potential of your business can be used to convince your banking or NBFC partner to believe in your vision.

Business Plan:

If you are a new business owner who would like to get started or an existing business owner who wants to expand the organization, you need a plan in place to show to the banks or NBFCs. If the business plan is impressive enough, then the following process is typically faster. You need to explain the purpose of the loan, vision, and other factors to structure your business plan well.


The above factors play an important role in making your loan application faster and more effective so you can focus on your business aspirations. Also before processing for the loan must check the business loan eligibility for easy approval. Having a thorough understanding of the lenders’ requirements can make things more comfortable during the loan application process.

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