you know the markets and economy are dieing, when there are less and less SI users to play with ...
Looks like a lot of the Daytraders Firms in the US may soon be sitting with a lot of empty seats to fill ,
New rules take effect in just over 1 month .
EVIL PATTERN DAY TRADERS
Pattern Day Trader does not refer to the scalper who uses a chart to make buying and selling decisions. It denotes the "black
mark" that your broker-dealer must place on your account if you violate a new SEC rule, starting this September. The PDT is anyone who
completes 4 or more intraday round trips in a consecutive 5-day period. Once you are marked as a PDT, you must maintain $25,000 or more
in your trading account or it will be reverted from margin to cash status.
Position traders may become Pattern Day Traders when they make mistakes, or exercise sound risk management. Each shaded zone invites
ill-timed positions in the wrong direction. Common sense dictates that these positions should be abandoned as soon as possible, in order to
limit losses. But doing so invites major trouble with your broker if you are trading a small account.
Statistics on trading accounts point out that we are a nation of small players. The percentage of us who consistently set aside
$25,000 or more for market speculation is quite small. So expect this new rule to greatly diminish the role of day trading in modern market
life. What does this mean to you? Two possible consequences come to mind. First, intraday liquidity and volatility may diminish significantly
as this rule couples with decimalization to cool the short-term trading environment. Second, swing trading tactics will grow exponentially within
this small account universe, because these traders will realize it's their only alternative for learning the market game.
hardrightedge.com
This sounds simple enough at first glance. So simple that it was heavily supported by the brokerage industry when the rule was first
proposed in early 2000. At that time, there was an endless supply of new talent that the brokers expected to open accounts for. They were
also willing to do anything they could to get the stigma of day trading (and SEC audit trails) off of their backs. And many direct-access
brokers already had a $25K or more account requirement, so they felt there was little to lose in going along with the proposal.
But that was then, and this is now. The trading industry has fallen on hard times in the falling market. Account growth has stagnated or
declined at many firms. Many direct-access broker-dealers are becoming painfully aware how much they depend upon small trading
accounts at discount houses to train their future clients. Many new retail traders use the lower risk of small discount accounts to build their
intraday execution skills (and profits), so they can someday transfer to direct-access. But soon this core talent will be getting very unfriendly
mail telling them to change their methods, or place new funds into their accounts. This will likely cut off the major source of direct-access
growth.
But the rules affect only day traders, right? Wrong. Consider this: in volatile markets, how often do you realize you've made a terrible
mistake just after entering a new position trade? Wise risk management tells you to get out immediately in that situation. Now what happens if
you run a bad steak and find yourself doing this 4 times in one week? You've just become a Pattern Day Trader |
