The harness the power of day trading, it is essential to know a few key facts before you get started. Be aware of the definition of what a day trader is as well as what day trading itself is. To summarize it, day traders perform everyday trades online. These are short term investments. Day trading power refers to the limit of the amount of these trades which can be conducted by an individual day trader. This also includes a minimum amount of trades to be transacted daily. Figuring out this actual amount is tricky. Because it's complicated, it is a wise idea to get guidance from a certified stock broker in the beginning. The broker can think about the rules governing trades and whether they qualify as day trades which are culpable under rules of day trading.

It's not a good idea to dive into day trading without full knowledge of the rules and the help of a stock broker. As you get your feet wet, be aware of what the rules are and try to learn as you go. When your trading account is designated as a day trader account, now you will need to calculate the day trading power of this account. The formula to figure this out is fairly complex. It is not a task a novice trader will find easy to perform simply because you don't have the training and knowledge. Some math geniuses or financial whiz might think they can handle it but figuring out this formula should really be left to paid, trained professionals who really know what they are doing.

Let's put some information about the formula out there for those of you who are already curious. The formula used to calculate day trading power and day trading buying power goes as follows:

4X Maintenance Excess = DTBP

It is likely you are already somewhat confused and might be scratching your head. You're not done yet, though. You still need to figure out what maintenance excess is as well, which is a separate calculation. The calculation for maintenance excess is:

Total Positions + Total Cash = Total Equity

Total Equity-Non-Margin Positions= Margin Equity

Margin Equity-Maintenance Requirement= Maintenance Excess

The figures used to make these important calculations are based on the previous day's closing stock prices.

Now you know you need to be aware of what makes a trade account a day trading account and you must figure out the DTBP. You also need to comprehend the minimum equity requirements for a day trader account. In many instances, this is a fairly substantial amount of $25,000. It can be as much as $5,000 more than that amount. If you day trading account goes below that minimum equity requirement, you will be issued a special “call” to bring the account up to the minimum. If you fail to do so, your trades left in the account can be liquidated.

Your day trading power only remains operational when you maintain minimum equity requirements in your account and your trading activities remain within the designated limits set for the account.