Currently, there are no limits on the number of trades a teen can place (Note: There is generally a $30,000 maximum that can be added to the account annually). However, there are certain rules teens need to follow in order to avoid trading violations. The following are three potential violations to be aware of:
A good faith violation is when someone buys a security (like a stock or a fund) and sells it before paying for the initial purchase in full with settled funds. Only cash or the sales proceeds of fully paid for securities qualify as “settled funds.”
A freeriding violation is when someone buys securities and then pays for that purchase by using the proceeds from a sale of the same securities.
A cash liquidation violation is when someone buys securities and covers the cost of that purchase by selling other fully paid securities after the purchase date. This is considered a violation because brokerage industry rules require you to have sufficient settled cash in your account to cover purchases on the settlement date.