ONLINE TRADING

If you purchase a security in a cash account, you must pay for it before you can sell it

In a cash account, you must pay for the purchase of a stock before you sell it. If you buy and sell a stock before paying for it, you are free riding , which violates the credit extension provisions of the Federal Reserve Board. If you free ride , your broker must "freeze" your account for 90 days. You can still trade during the freeze, but you must fully pay for any purchase on the date you trade while the freeze is in effect.

You can avoid the freeze if you fully pay for the stock within five days from the date of the purchase with funds that do not come from the sale of the stock. You can always ask your broker for an extension or waiver, but you may not get it