FYI if you have accounts under 25 k -new margin rules
Chris Schumacher
MARKET
8/23/01 2:01 PM ET
Hi Bill, Tony, everyone. Just got off the phone with a
few retail type trading firms about the new 25K
margin rule that will be going into effect pretty soon.
For those who aren't aware or are thinking about
getting into the daytrading business, new rules will
require that you have a $25,000 account to
establish margin and trade. Margin will be going
from 2-to-1 to 4-to-1, and anyone not maintaining
25K will have what is considered a cash account,
not eligible for margin, and cash accounts are
ineligible for daytrading activities. This will no doubt
have an impact on the industry, as most studies
show that majority of traders have less than 25K in
their accounts from month to month. While the
powers that be might think this is a good thing, I
hope the opposite doesn't happen. Small fish will be
borrowing against homes and other assets to make
the 25K, get 4-to-1 margin and then go in the hole
to a greater degree. This smells like disaster more
than protection. Whoever thought more money
meant more intelligence or better trading abilities
missed the boat on this one. So, if you are thinking
of getting into the game, have 25K, but please don't
raise the funds in a manner that goes against a
solid financial plan like borrowing against other
assets. The learning curve can be fierce, and 4-to-1
margin can really get you into trouble if you don't
have proper money and risk management principles
that are adhered to effortlessly. Risk capital only
should be used. You can reach me at
Chris Schumacher
MARKET
8/23/01 2:39 PM ET
Gotten a lot of emails about this since the last post.
Rather than kill my fingers, check out these URLs:
sec.gov and
nasdr.com
(copy them and paste them into your browser). |
