LastShadow's Position Trading Message Board

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Strategies & Market Trends : LastShadow's Position Trading

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To: LastShadow who wrote (227)	9/5/1998 12:17:00 AM
From: AlienTech	of 43080

I am sure plenty of people have had experience but everyone needs a reminder now and then.. It never happens to you, all it takes is one mistake. Guess this is where expereince counts. This guy did much worse than me, But when a broker suddenly changes your 35% margin you were planning for suddenly decides that 35% aint enough and they want at least 50% now you end up between a rock and a hard place, should you sell? should you send in more money? should you liquidate right now when there might be a bounce tomorrow?. Also with all these electronic brokers like etrash where each mistake can cost you months of wages things can get worse real fast. So with that in mind, Electronic brokers become the next best shorts after the banks. >>>>> Margin Accounts & Discount Brokers by Burned_________Once (43/M) Sep 4 1998 1:33PM EDT Margin calls & discount brokers: In a volatile market that is nearing its peak, margin accounts are a way to commit financial suicide. There is one thing worse than investing large amounts of cash with Schwab (or any other discount broker). That is buying on margin against the same large investment. When you do this; you need to realize 2 things. You just took a part-time job and you have completely lost control of your entire account. You need to be watching the stocks involved twice a day every single day. Probably more than that; if small caps are involved. Even at that; the one day you are in the hospital may be the morning your investment may go south. In theory there are safeguards in place as you describe above but guess what: On a volitale day there is usually also extremely high volume. They are not obligated to make that 35 % call. If they forget or don't have the people to call; it is your problem not theirs. They can immediately begin selling off your stock and they will. Since they are a discount broker they are not expected or required to be full service. You are not going to win in court; trust me. That is why you need to re-read the contract you signed at the outset specific to margin accounts. It gives you a lot of "guidelines" they are going to try and adhere to but if you read carefully they commit to nothing. Bottom line is: Your account will be managed by them at their discretion. It says that if they don't remember to contact you or more likely they don't have the manpower or whatever; your first notice that there is a problem may be a call that your account has been liquidated or will be at the end of this phone call. "Bring us a check to bring your remaining balance up to zero" !!!!!! Do you live within a half hour drive of your discount broker ? Is your boss going to let you leave at a moments notice ? This happened to me. *************************************************** It is very difficult to learn from other peoples mistakes !!!!! ************************************************* But I highly recommend that you not open a large account with a discount broker even if your intention today is to never ever buy stock on margin. You never know when you may be tempted to buy on margin and it is extremely risky. I have bought on margin twice in my life for very short periods and the second time has ruined my life. Every single day you leave a margin account open; you are risking your entire investment that we are not going to have a panic in the morning. If you have been liquidated in the morning; it doesn't matter if the stock bounces back that afternoon or the next day. You are finished. Leaving it open for a few days is tempting fate. For periods longer than that you are asking for a nightmare. ************************************************* and you can lose much more than your original investment !!! ***************************************************

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