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

To: Jon Tara who wrote (12245)	3/10/2001 1:04:42 AM
From: LPS5	Respond to of 18137

Now imagine this person taking out a 2nd mortgage to bring their account up to $25,000 I suspect that the regulators would insist that any firm reviewing this theoretical customer deem him/her entirely unsuitable for daytrading as per liquid net worth requirements. Taking loans to fund the equity portion of an account requiring minimum balances of such - particularly for a speculative strategy such as daytrading - is ill-advised for an experienced trader, let alone for someone just starting up. Though individuals can lie about things like this on their new account forms, it is my belief that the focus of these rules is not only geared toward brokerage customers, but toward broker-dealers as well, by way of making them take the suitability and risk management implications of that portion of their business that classifies as "daytrading" more seriously. And, I do believe that - whether purposely or incidentally - one immediate effect will be to reduce daytrading "hobbyists," if you will. LPS5

To: Jon Tara who wrote (12245)	3/10/2001 1:30:58 AM
From: LPS5	Read Replies (1) \| Respond to of 18137

Now imagine this: borrow, lose, repeat. Borrow, lose, repeat. Oversimplified. I think that this gedanken exercise has three iterations: * 1. Attempt to open daytrading account Determined unsuitable Choice of opening "regular" brokerage account and/or trying a different firm (repeat as desired or necessary) 2. Attempt to open daytrading account Suitability affirmatively determined, min. amounts deposited Successful trading (Happy trails) 3. Attempt to open daytrading account Suitability affirmatively determined, min. deposits deposted [3a.] Lose a certain amount (firm discretion, internal parameters; say "x%" of initial account value) Suitability reassessment triggered at x% loss. If reassessed as unsuitable in light of losses, go back to . If reassessed as suitable, continue trading. If successful, go to 2. (repeat as necessary) [3b.] Eat into $25,000 min. equity Suitability reassessed immediately. If assessed as suitable, no trading permitted until equity balance brought back up to minimum amount. If determined unsuitable - whether from a risk and/or strategy perspective, see . *** That's how I think many firms will handle the process. LPS5

To: Jon Tara who wrote (12245)	3/10/2001 1:43:41 AM
From: TheStockStalker	Respond to of 18137

Now imagine this person taking out a 2'nd mortgage to bring their account up to $25,000, so that they can "stay in the game". I think I like you am pretty much against being governed to protect me from myself. But if we are building stories, then maybe you can find comfort in the fact that for every one that mortgages his house to build a $25,000 stake to trade with under the new rule there will not be 8000 others taking out cash advances on their credit cards or pawning their possessions to build the $2000 - $5000 stake that would have been allowed previously under the old rules. PDT