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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Richard Estes who wrote (6720)	1/30/2000 5:38:00 PM
From: Tai Jin	Read Replies (1) \| Respond to of 18137

People can and will lose money in the stock market no matter how much money they have or how smart they think they are. This rule won't stop that. This rule is to encroach on the daytrader's freedom and to restrict their actions. Accept this one and the next one might hit you. As I stated earlier, this rule doesn't (and isn't intended to) protect those with lots of cash to burn. It doesn't even guarantee that traders with smaller accounts won't lose money. But I think it has the potential to reduce the risk to the new trader. The problem with a market like we have today is that it will attract many people because of the fabulous gains, and people are inherently greedy or looking for a way to quick riches. That's why lotteries are so popular (I don't like lotteries - I think of them as a stupidity tax). But most of these people are gambling, not trading. If you are in the market to gamble then you are going to lose. I believe this rule is intended to reduce the risk to the gamblers who play the market. I believe gamblers are more likely to use full margin. Someone who is just making ends meet probably shouldn't be buying lottery tickets, but he certainly shouldn't be gambling in the stock market either where he could lose a lot more money. Of course, the other side of the coin is the bona fide small trader. The small trader probably should be allowed to use margin. But we all have to trade within the rules. A good trader will adapt and be successful. But if we are such good traders then why are we complaining. After all, we're taking money away from the gamblers and bad traders. So we should welcome them, right? Don't get me wrong, I don't like regulations that have no good purpose. So far I don't really see anything wrong with this one, but perhaps the small/new trader should be asked for their opinion. If they want to raise the limit to $250k, that's fine with me. But there better be another way to short. ...tai

To: Richard Estes who wrote (6720)	1/30/2000 8:25:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 18137

I agree that people will lose money in the stock market no matter how much or how little they have in their account, whether its $10,000 or $100,000, and are capable of losing all of it. I once had a friend who started with $100,000 for options. Inside of several months, he whittled it down to $20,000, and was still trading the last time I had talked to him. This $100,000 was just about all the money he had in his bank account. Margin is not the problem. It is the lack of focus and discapline demonstrated by the new day trader with respect to managing their trading, particularly in the area of limiting their losses. A trader will not lose more than their catastrophic stop loss. And I will say that heavily leveraged vehicles apparently do attract those that are the most risk unaware of the lot. These are for instance the traders who double and triple up on a day trade that goes against them demonstrating no concept of risk. How much a trader is trading with in their account has IMO no bearing on the losses they end up incurring in their account. Actually the more they have in the account ends up being more money they can lose in the market before reality may enter their picture. IMO it is more importantly how the trader manages the risk of the trade that has the most impact the results of their trading. Given what I have seen here in other threads at SI, I can see many if not most who pursue trading in the markets definitely have a problem in this area. But that is their choice to pursue something that can financially hurt them because they are unprepared for what they are doing in the stock market. And any rule that attempts to protect the customer from themselves in this way also imposes on their freedom. If a person is stupid enough to trade in margined vehicles for that "quick profit" with limited awareness and preparation and experience in what they have placed themselves into, then I say let them do it. If their face gets ripped off in the process, then so be it. We are talking about adults here, not children, that are certainly capable of making their own financial decisions in their life, and for good or bad, should be allowed to do so. Unless it can be shown to be a detriment to another person's financial health, like in the case of managing a fund or public accounts, why stand in their way? Now take myself for instance. I am no pro but I want to discuss how I am able to manage losses. I allow only a two point catastrophic stop on my trades with actual exits at a loss being limited to only 1 1/4 points much of the time. This amounts to about $60 on a $60,000 e-mini SPOO contract with a maximum possible loss at $100. And when I incur a series of losses, I stop, re-evaluate, and may just watch the market for the rest of the day, particularly if I find that I am the problem and not the setups I am trading or the method I use to trade them in a given market. And when I get careless, which has happened, I find myself unhappy with myself over it for the rest of the week. I have a very strong dislike in giving money awawy to the market. So I find most of the money in my account is there for "stupid" money, a buffer that allows me to survive my learning curve and the stupid mistakes I can end up making getting through it. But the same account given to a dice roller, like many traders who are out there, can probably finish my account inside of a couple weeks of trading. It would just take them a little while longer to finish a $100,000 account. But finish it they will. So I do not think this new rule will help many people from self-destructing. Actually it may help some to wipe themselves out by being force to put up even more money which they really did not have to speculate with in the first place. If they want to limit trading on margin who are serious and have the substantial financial where-with-all to survive a significant losing streak of gambling, perhaps $100,000, no, more like $200,000 or more may facilitate this purpose along with a limit to how much of their money can be placed into the market at one time. My two cents of this topic. :-) Bob Graham