Why The Pattern Day Trader Rule Proves The SEC Rivals Osama Bin Laden In Terrorism

Posted by timothysykes on Wed 4th of Jun, 2008 01:25:35 PM

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day trading infidels Why The Pattern Day Trader Rule Proves The SEC Rivals Osama Bin Laden In Terrorism

Yup I said it. While making a nice quick 5+% American profit, or $350ish, in an hour on my LGDI trade a few weeks ago, my blood boiled over due to the missed opportunities caused by the SEC’s pattern day trading rule. And while I’ve attacked it in the past, there was no formal summary post that explained all my key points. Considering how many stocks are in play today and the fact that I am forced to ignore 99% of them, it’s time I unleash this fury.

The formal definition of this inane rule is HERE, and once you read it, you’ll begin to understand why I call it the Reign Of Terror Rule. In fact, I’ve got an entire category devoted to it as I’ve documented each and every time it’s interfered with my trading since I began TIM in November 2007.

Basically, if your trading account is below $25,000—as are the accounts of so many poor people out there—you can only day trade (meaning in and out the same day) 4 times per week. If you trade more than that, you get flagged as a pattern day trader and your account gets restricted because you’re considered evil, as most day traders are believed to be. (Yes sometimes you can trade a few more times than that—since its all rather gray area and the brokerage firms themselves despise this rule—but my point is there should be no limits whatsoever!)

Even though I’ve still got over $500,000 in liquid cash to trade with, I went back to my $12,415 roots specifically to draw attention to this injustice because most people, including industry big wigs, don’t even know about it. After all, the last time I had this little money, it hadn’t been instituted and I’m forever thankful since trading freedom allowed me to get rich.

Now, in my quest to repeat my feat of turning thousands into millions, I’m only up 50% in 7 months, thanks in large part to the obstacles created by this rule, whereas if I wasn’t chained down, it’d be more like 100-200% maybe even 300%. No joke—click that category above and see what kind of crap with which I’ve had to deal.

I know from countless blog post comments and emails from you guys—even you non-trading addicts out there—that it’s absolute hell for you too. So, in the comments section of this post, please write about any and all experiences with this rule in order for the freedom-hating SEC can better understand the problem. Sad to say, but I think the only way to get the attention of these terrorists—and that’s what they are, using this rule to attack wannabe day traders everywhere because they disapprove of our values— is if the comments section of this post surpasses the 9/11 body count, which was 2,974. But since this is about one of our great nation’s most important ideals—freedom—it’s imperative that we succeed and show these terrorists what we’re really made of!

Please be honest—thanks to all the easy money that causes us to act like immature pricks (see EliteTrader.com and my inappropriate terrorist comments (although this is what it’s gonna take to get people’s attention….sadly)), we day traders already have a bad enough reputation.

Here, I’ll start—See some examples of what I’m talking about HERE, HERE, HERE, HERE and HERE and that’s all just in the last few weeks! Feel free to refer to problem # in your comments if you have similar experiences/thoughts:

Problem #1: Like limiting a painter to a certain number of brushstrokes

Day trading is all about trial and error—it’s best to test out the waters with small positions, scaling in and out depending on the price action. When I’m limited to one position per day—at most—I’m forced to be perfect in my timing, which not only is incredibly difficult, if not impossible, but because I’m trading smallcaps and microcaps, this rule has made this game more dangerous than it has to be. Like painting, trading is an art—can you imagine a rule where an artist was limited to 1 brushstroke/day? The painting not only would take forever but it would suck! This is wrong. I am most profitable when I can scale in and out easily, cut my losses quickly and re-enter when the price action is more to my liking.

Problem #2: Hurts Profit Potential

Since microcaps and smallcaps are somewhat illiquid, worthy trading opportunities come about only so often and when they do, they usually come in bunches. Thanks to this injustice, I often find myself unable to trade all the worthy opportunities out there, hurting my profit potential.

Problem #3: It’s Gosh Darn Un-American!

Uhhh, isn’t this a free country? Shouldn’t we be able to get rich in the stock market? I got rich by trading thousands upon thousands of stocks and I made plenty of mistakes because thanks to any other ridiculous SEC regulations, there was no way for me to ever find/have a mentor. Now that I am that mentor that soooo many people need—teaching PennyStocking to anyone interested—the SEC has this rule that basically says the way I got rich in 4 years—playing the allegedly most random /dangerous stocks in the world and without using leverage—is too dangerous?!?!? Oh no you didn’t! My strategies are still gonna make people rich—quicker than most—but thanks to these SEC Bin-Laden-like-freedom-hating bastards, it’s just gonna take people with under $25,000 a little longer.

Problem #4: Hurts Short Sellers Who Add Market Liquidity

That’s right I said it, short sellers are good for markets—despite all the crap we take, we bring reason and liquidity into one sided markets, especially those that are filled with hype and manipulation like the penny stock market!

Problem #5: Punishes the wrong people

I understand this rule is supposed to protect those who can’t afford to lose much money and since they have little $, they are assumed to be unsophisticated traders/investors (who besides crazy TIM doesn’t use all their $ just to prove a point like this?!?!), but this rule is only applicable to those of us who trade securities—by and large who don’t even use leverage—while allowing traders in infinitely more dangerous niches total freedom. Those are the guys about which Osama Bin SEC should worry—their trading has proven capable of bringing down legendary institutions HERE and HERE and economic collapse!

So,go on and leave short or long comments, but comment often—in the words of William Wallace, I say to you “Aye, fight the SEC and your future in the financial industry may die. Run, and it’ll live… at least a while. And dying in your firms, many years from now, would you be willin’ to trade ALL the days, from this day to that, for one chance, just one chance, to come back here and tell Osama Bin SEC that they may regulate our industry, but they’ll never regulate… OUR FREEDOM!

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10 Reasons Why The Incompetent SEC Places Restrictions On Day Trading March 4, 2009
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You Say My Strategy Is What? A Wakeup Call January 9, 2009

cacaosteve

Actually, you can only day trade 3 times. 4 times and you are flagged according to what I have read.

"A pattern day trader is defined in Exchange Rule 431 (Margin Requirement) as any customer who executes 4 or more round-trip day trades within any 5 successive business days"
http://en.wikipedia.org/wiki/Pattern_day_trader

novalis78

so...ROYL below 9, what's your target?

Evan

FOF YEAH!

Keith

It should close the gap @ 8.40

YngvaiMalmsteve

Yeah, the daytrader rule is exactly what lead me to one of my biggest trading losses ever...JRJC. It was a trade I shouldn't have got into in the first place, but what made it worse was the fact I couldn't get out quickly without violating the rule.

Good trading means taking losses quickly, and this rule completely prevents that

codyhof

I started trading with real money a week ago and am already being limited by this rule...

Keith

Couldnt get any royl shares with scottrade

Ryan

Level II shows someone is waiting to buy 12000 shares of NTI at $10. Does that mean this person knows NTI is falling back to $10 or what?

Keith

Squeeze on GRO

Davey

Yes the potential profits lost hurts, but it is the real losses that hurt even more. When you are limited with trades you end up holding these POS longer than you would if you could get back in. We get squeezed because we think we won't get a chance to get back in and before you know it you've got one big loss instead of just cutting losses quickly and looking for a new entry.

lmsmith

This rule really does hinder my ability to make so much more money that I KNOW I can make- I always have to choose between 3 stocks- and sometimes the one I pick is not the favorable one that tanks or rise that fastest, among the 3

traknologist

Keith you have to open an account with thinkorswim.com and use tim as your reference.

Keith

Long GRO @ 6.75

Evan

I've been watching the Level II on NTI all day- nowhere near the type of manipulation as other stocks 'in-play' can sometimes show, but I've definitely seen the ASK (or buy) side giving up on fills and lowering the price. As to your big order at $10, that could be real or fake- no way to know until we get closer and see if it disappears, shrinks, or breaks into pieces. One thing's for sure- Market makers had fun on the low volume pop above 15 this morning (these low floaters can be crazy).

Tim good post! I'm over the 25k problems at this point, but have definitely been there and know how bad it sucks!

James

I'm a newbie trader from the UK, and currently I'm having to decide whether I should trade in the US or UK markets. This rule alone, however, looks like a great reason to stay in the UK.

It makes me wonder if the SEC is likely to have discouraged many more non-US traders like myself in the past, losing out on hot money flows (when we buy shares) and additions to market liquidity (when I short-sell shares)... If thousands of other foreign investors decide not to operate in US markets for the same reason, I wonder how great an affect this will have had/is having on the US economy?

cacaosteve

guess my comment didn't make it through at first... You can do 3 daytrades and on the 4th you are a pattern daytrader. "A pattern day trader is defined in Exchange Rule 431 (Margin Requirement) as any customer who executes 4 or more round-trip day trades within any 5 successive business days"
http://en.wikipedia.org/wiki/Pattern_day_trader

cacaosteve

guess my comment didn't make it through at first... You can do 3 daytrades and on the 4th you are a pattern daytrader. "A pattern day trader is defined in Exchange Rule 431 (Margin Requirement) as any customer who executes 4 or more round-trip day trades within any 5 successive business days" according to wikipedia.

cacaosteve

One of the obviously bad parts of the rule is that you might not want to get out of a position because you will violate the rule. That is ridiculous! You CAN get out but if it is your 4th daytrade you might get flagged.

getshorty

COnsidering re-shorting gro and hold overnight.

Will wait for possible squeeze.

Any thoughts?

cacaosteve

You could divide your capital between 2 or more accounts. Since you are not using all capital on one trade it should not be a problem. Then when you are up to 25k just combine to make it easier.

S Adams

With the market as volatile as it is people who can't daytrade are at a huge disadvantage. I'm a little surprised there is no class action lawsuit yet.

Adam

i got squeezed on grow, short 6.47 out 6.67. saw it break 6.50 a few tmes and jumped in

getshorty

Do what cacao says, I do that, right now over pdt on Ibrokers (tomorrow will be free) and have all trades left on TOS, and have taken the opposite side of the trade in the other broker to get net 0 position. closed both next day to avoid day trade.

I think in order to make a strong case we should need some statistics on how many people has loose their shirt because overtraiding and before the PDT rule and compare to how many people has lost their shirts after the pdt rule. we'll need that hard evidence to get the case going. Other way it will just look like greedy day traders against poor grandma.

Timothy Sykes

u shouldnt have to split your account into 2 and pay double commissions, u shouldnt even have to have to be considering work arounds...this is a like u being in a wheelchair and living in a house with no ramps, only stairs! (well u dont have to go upstairs....)

Jeff

It should not be the responsibility of the SEC to help stop people from losing their own money. It's the responsibility of the people doing the trading and no one elses...

getshorty

THoughts on re-shorting gro?

A am i becoming a pig?... oink oink?

Alex

Well there is some logic behind it. And I don't think it's just because the SEC thinks they can't afford to lose it (there's no law preventing the same person from gambling all that money away in Vegas). 90% of traders lose money, and probably most of them are inexperienced traders - who probably have small accounts. So I think the SEC is protecting them from the predators out there - the brokerages who encourage active trading through their marketing and the experienced professionals with lots of experience and sophisticated trading systems. Without the rule, an inexperienced trader's $20,000 account could end up in the account of an experienced professional in a short matter of time. Sure, it sucks for people like Tim Sykes who have gone from $10,000 to $1M, and then decide to start trading with $10,000 again. But the majority of people with $10,000 accounts are probably inexperienced and probably don't know where they can get an edge in the market.

novalis78

ROYL gap down tomorrow?

TomT

level II in TOS??? it doesn't show much.. i'm I missing something

Timothy Sykes

short 500 PTEK at 5.15, will add if it spikes tomorrow, but this could just fall apart here

getshorty

cred breaking down...

Bye bye baby..

Keith

PTEK should move to 4.70 quickly Iam in short from 5.48 this norning

GT4NE1

TomT,

This forum post might help. Looks like more detailed Level II stuff is in the works at TOS.

http://timothysykes.com/forum/viewtopic.php?id=480

Adam

nice fade on GRO too bad i blew all my shares of it and took a loss

Timothy Sykes

out at 4.90, not ideal, meeting, be back in an hour cya guys, good solid trading day!

TomT

Thx alot GT4NE1

getshorty

Shorted ptek at 4.78 feeling a little squeezee, holding overnight.

Al

GGC shorted @ 4.81 FYI only trade at own risk

Bill

I live in Canada and my online brokerage does not enforce the pattern day trading rules, bless their hearts........

Anthony Brown

What's with these NTI trades? A couple hundred shares go for ~14.10, followed very quickly by a couple hundred shares at 14.3499. It's happened about 4 times now.

TimSucks

Occupation is Terror

codyhof

There goes PTEK

Terri

Cool site! I am watching and learning. Lots of good trades today..congrats!

Keith

Hey al I am not a good trader but your short in GGC wasnt a great setup. There is too much support just below your entry around 4.75 and then more @ 4.60 which limits your downside potential.GL though

Alex

Is HEV being pumped by paid mailers or a newsletter? Or is it just going up because it's a Li-Ion battery company?

Keith

Are we going to see GRO get to unchanged on the day for a Spinner top?

Evan

I know off topic- but who is the girl in the background on CNBC- gotta get to Harvard!!!

JeffMoates

Hey everybody, I'm back! What's happened?

Al, duh, we always trade at our own risk. Thanks for the warning though.

Who's shorting GRO overnight? Anyone? Ymaighlejihdf? (I'm too lazy to scroll up and look at how to properly spell your name)

Al

Thanks Keith

balls...or just plain nuts...

PDT rule burned me twice on my zecco account. The first time, I played dumb, and got my privileges back. The second time, I shorted a stock, then added more shares to my short position, finally covering all at once. This was counted as two day trades, putting me over the limit, again restricting my account. I've switched to TOS, so I won't have to wait 90 days to daytrade again. I'll have to use Zecco for holds only.

codyhof

Im considering jumping back into GRO at 7.00 Jeff, depending on what it does into the close. A bit scared of holding overnight but it may pay off.

TommyTim

SQNM is a great short at 9.51. The news is good but not that good. Historically biotechs with this type of news get sold off the next day.

Al

Jeffery Moates that is why your a lemming your LAZY.

enjoy

younggunz

I think the rule is ridiculous. Like many have said before, there is no restrictions on gambling. Limiting day traders because they think its bad for the traders and the market is humorous considering whats happened to the economy in the last year. Huge big name cooperations are loosing their shirts. If day trading was such an addictive gambling epidemic there's be more stories of people leveraging debt to get above the $25k limit. People aren't doing that the limit isn't doing anything but slowing down people that want to learn to trade stocks and turning away those that don't think it is worth it unless they have a lot of money.

I would be a little more OK with the rule if it was limited to a certain trial period when starting a new account at a broker. That way someone thats had 6 months to a year with a broker is more likely to have done their homework then someone fool heartedly jumping in. At least I think it is more likely that the SEC would compromise with a time limit more then completely dropping the rule all together. It may be easier to bend them then break them.

Evan

Young Gunz- great post! Tim- I'd give him $5 of my TimBucks for that one since I've posted at least 5 off-topic comments in the past few days.

ps. NTI- you're cleared to tank now- thanks!

YngvaiMalmsteve

No, I'm not shorting GRO. I did re-enter my ROYL short position when the 60 min sma crossed the 10 min sma. But that was still a poorly timed entry because it was right at support at $9. Luckily it's still close to $9. I'll probably add a bit to my position into the close and look for it to fill the gap tomorrow.

Yeah, it's a commodities play and not an ideal setup but I would say the odds are still in my favor for a further decrease.

YngvaiMalmsteve

NTI...probably a 50/50 chance now of it going either way...just like playing roulette

TomT

Ok.. overnighter.. ring in..

YngvaiMalmsteve

Added a bit more to my ROYL position. My average entry price is now $9.04.

eb

YngvaiMalmsteve...im also short ROYL. yes...under $9 now.

novalis78

ROYL, nice fall towards the close. Yngvai, are you still on board?

YngvaiMalmsteve

ROYL closing right at $9

timothysykes

new post:

http://www.timothysykes.com/2008/06/04/why-geek...

i hope u ROYL shorts get squeezed royally, tomorrow's a new days, i'm waiting for it to crack support at $8.80 first

JeffMoates

TommyTim, pretty decent pick with SQNM, although I bet it would be a 3-4 day short to get any decent gains.

eb

novalis...you in ROYL also? Nice close.

YngvaiMalmsteve

Yep, novalis, that was a nice fall into the close and I'm still on board. 200 shares at $9 and another 35 shares at $9.29 for an average of $9.04.

If I had been smart I would've never entered earlier in the day, and just waited for the close in the first place. Would've saved myself that $100 loss.

Reflexivity44

balls...or just plain nuts...

You were able to short these stocks on zecco? My list does not have most of them.

novalis78

yes, the same for me...was way too late. did struggle with ENT today, was looking at a nice $.40 gain, but my limit was off one penny, did not get filled, and had to get out of my position with a loss instead :-(

Still, ROYL looks into the abyss, we will see tomorrow. GL to you and eb!

eb

novalis...thanks. gl to you also.

YngvaiMalmsteve

Tim, I'm a bit confused. You always talk about shorting into the close on the 1st down day of a big run-up. You yourself did that with PDO on its 1st red day, shorting around $20. Yeah, you got bounced out, but I remember you saying it was still a good trade due to the odds. So am I missing something here?

timothysykes

if u guys could, please post your daily dollar gain/trades in the comments section of this post:

http://www.timothysykes.com/2008/06/04/why-geek...

so i can feature u!

J Monie

Tim - If oil continues to go down and dollar up, how will your holdings in PRPFX do

Timothy Sykes

na PRPFX is diversified and conservative, expect to have $ in it for many years, if not decades

ivegotstylekid

just got out of my 90 day restriction from the last day of febuary, sucked really really bad holding out. I'm on disc 3 of the dvd set and will be joining you in pennystocking really soon.

Bob (VC)

It's interesting that the lack of regulation in gambling has come up when talking about the SEC PDT rule. There is a simple reason that there are no "small account" type regulations in gambing- the big money casino owners can afford to pay their lobbiests to stop any type of regulation that might hurt them, whereas no one gives a damn about speaking out for us "poor" (and as far as Wall Street is concerned, we are poor) people.

If this hurt the brokerages a bit more, we might get some backing from them, but we're small fish even to them..

J Monie

Thank you Tim :)

J Monie

Start up a petition w/ solid evidence and I have no doubt in my mind you could get hundreds of thousands of signatures.. Present it to SEC with your argument and maybe if your lucky they wont throw it away right in front of your face, but after they smile, shake your hand and you walk away ;)

DaBear

I have sufferd all of these problems 1 - 5. This rule is just another way to keep the poor poor.

DaBear

I have suffered all of these problems just another way to keep the poor poor

farsighted

I wish they would raise the number of trades to 10; I think it's absurd for 3 trades a week.

when they implemented this rule things were different.

mattyfattie

DAMN THE SEC- WHAT A BUNCH OF NAZI'S! THERE JUST FUCKIN WITH U TIMMY BECAUSE UR JEWISH!!!! SUE THEM FOR DISCRIMINATION!!!! shalom shalom.

bigkinder

Max's Investment World Stock Market Challenge. is it woth my time???????

DaBear

Happy to break even today:)
Should have taken profits faster, theres no reason to get gready you can always place another trade and lock in profits, other then of course for the Ben Laden communist basterds the fucking SEC! But I should have know better I was temperarly on the wrong side of the trade.

Jose

I FUCKING HATE THIS RULE!!!!!!!!!!!!!!!!!

YngvaiMalmsteve

You guys should all be writing letters to the SEC. They have a section on their site where you can file complaints. Not that letters will do any good, but it's better than bitching about the rule amongst ourselves. If you can get enough people giving them *logical* reasons as to why the rule should change (i.e., it penalizes traders for exiting trades quickly when they should, and the rule increases their risk), who knows...maybe somebody will listen....or maybe not. But it's always worth getting your voice out there.

I've written two letters already.

Henry Lee

My brother said it the best in describing how stupid the PDT rule is. Is the stock market not the biggest casino in the world. How come i am restricted in placing more than 3 bets a week. I can go to a casino in Las Vegas and place as many bets as i want. Imagine if Casinos had a PDT rule. You can only gamble 3 times a week,but if you have $25,000 or more, you can unlimited gambling privileges. How insane is that!

Jonathan Lawson

There are several issues with the regulations imposed on small traders (not necessarily unsophisticated).

1) Limits execution of good trading discipline.
If I enter a position, and set a stop target. I may be stopped out on the same day. If this happens 3 times in a rolling 5 day period (easy to do in current market conditions), the trader won't be allowed to exit position 4 (risks' catastrophic losses). And will have his acct locked for 90 days. For a crime against whom??

2) Overly regulated. A maximum security society.
Regulators are too concerned with keeping us "safe". I don't want regulated safety, like this. It is ok to provide safety against fraud, but not to regulate different laws for different financial levels of investors/accts. I have 4 accts i trade. In one brokerage acct over 100K, and 3 others below 25k. In one acct I am consider a "sophisticated" investor, yet the other accts I am not. What gives. I feel much more secure in my larger acct, and I am able to grow that acct more quickly because I am able to be more nimble as market conditions change.

If I buy 4 equities on a given day, and Goldman Sachs does the same, yet later in the day something significant happens (i.e Middle eastern conflict), both GS and I decided we don't want to be in those issues. Who losses? Me. GS exits their 4 positions, and I can only exit 3. If I choose to exit 4, my acct won't let me or I am banned for trading that acct and labeled as a Pattern Day Trader. Who was this law designed to protect, it sure isn't me.

3) Outdated regulation.
Although this regulation is only 3 years old, it is no longer relevant. Perhaps it was created to prevent overtrading and excessive commissions. Commissions are cheap. They are much less expensive than having to hold overnight positions in the case of a rapidly changing market condition.

4) Who does it benefit?
This teaches the average individual that they are not sophisticated enough to handle their own money. And suggests they should give their money to a large Money Manager who operates with different regulations. Submit to the system.

I truly hope that the regulating institutions recount their decision, and repeal this Pattern Day Trader regulation.

YngvaiMalmsteve

Hey, Jonathan, those are AWESOME points. You should write a letter to the SEC regarding all those points. It may not do any good, but if we get enough traders writing letters (I've written 2 to the SEC and one to FINRA), giving logical reasons as to why this rule hurts us (not emotional rants or anything like that), maybe...just maybe...someone will eventually listen. I doubt it, but it's better than just complaining to each other about it.

The key is to clearly outline how this rule hurts traders rather than helps them.

daniel

i closed my account due to this terrorist rule.
i now trade stocks through CFD trading (contracts for difference).
(non legal for US citizens).

more commissions but great leverage and no PTD

Chris

After I was finally able to scrounge up 5 grand to start daytrading, I opened an account. Now this dumb rule lets me trade one day a week before I've exhausted my 4 trades. I can't get any experience or make any profits like this. What am I supposed to do, sell my house?

El Dorado

I have been flagged twice in the past year. The first time the brokerage simply called me, we talked and nothing was done. The second time the brokerage took away the "margin" part of my account until I wrote a letter explaining what my intentions were. I did this and the next day margin was restored.

I think the rule is preposterous while simultaneously believing that people absolutely have to be held responsible for making sure they have enough cash to cover any calls for additional equity to cover trades.

Self-regulation is in the toilet because of current events and while we can try to cast blame on someone else; if too many people blow it the rest of us will pay for it by losing privileges.

skEwb

Timothy you are my hero! I wanted to follow the same sort of strategy you used when you went from poor to rich. I had not seen your website before today, but I sent this letter in to the SEC prior to reading this article.

You are a true man with high knowledge and integrity. I have high respect for you and I will let you read the letter I sent to the SEC below. Please continue your hard work against this Pattern Day Trader injustice.

The letter as follows:

"I just want to say that the pattern day trade rule is absolute junk. Why is the SEC protecting me from myself? Is the SEC trying to say I'm stupid and I can't make my own day trade decisions?

Why does having $25,000 make a difference? If I have less money than this does this put me in a bracket I'm not supposed to attain? Therefore I must be locked out and discriminated on my trading abilities because I have LESS money?

I can buy as much as I want but I can't put in a sell limit because I've been identified as a pattern day trader without the minimum $25,000. How does this make sense? The SEC is saying you can't keep short term gains you have to go long unless you already have a lot of money.

Does the SEC even realize how Unfair this is?

You need to eliminate pattern day trading and let the free markets be free. Right now it's dictator market not free trade market. Because you're forcing me in a position I don't want to be in.

What's next? Are we going to need $50,000 in an SEC approved bank to file a complaint?"

flex

of course the reason is to ensure that only serious professionals attempt to day trade. its not gambling, and most of the fools who mess with it lose their money. so its even somewhat benign that the SEC tries to limit them. otherwise you would say it was a scam to entice any fool with a few thou to come give them up to the market.

or you could trade futures for much less. or options.

skEwb

Well if Tim turned 12k into 1.65 million who's to say nobody else can do the same? That's ok though, the SEC and US traders wont get my business. I'll take it to Canada. Their brokers will gladly charge me trading fees and let me keep my profits so I can get to that $25k.

If someone inherited money and has $25k or more it doesn't make them any smarter than someone with less money that really knows how to use it to make more.

Stocks are pretty much gambling, once you put in your money in a stock and you're labeled a pattern day trader you lose control. That stock could go up or down and it is not your decisions. This is pretty much gambling, but gambling with limits!

I don't want to be protected If i have a few thousand to lose it's my choice to lose it.

Me

I opened an account a few days ago and wanted to get into the swing of this recent bottoming out with some extra cash I have. I figured it would be interesting to see where it goes and the money wasn't anything I'd miss if I lost it (2500). I've made a few trades and am up 16.6% in 3 days (account is in cash at $2923). I could stop now and outperform my sad 401k mut funds. Anyway, on my last trade I get this notice saying I'm a pattern day trader. No shit! I call up the broker and tell them what happened and they tell me I can't day trade, it's the rules, and they've exempted my account one time but I better not continue. What a crock of shit. So now I guess I have to find stocks I'm comfortable holding overnight, which is none. This market is messed up one day to the next, with a LIBOR rate in london tanking an auto stock in detroit the next morning. This is frustrating me because I could put 25000 on the line by going into a LOC I have, but that would be a risk to me, while 2500 simply is spare cash. Isn't this the opposite of what they wanted to accomplish? Ridiculous.

Bruce

Couldn't agree with you more. Over the past week, this rule has cost me substantial gains. Friday I was screaming at my computer knowing that a $2k gain could easily turn into a $6k loss on Monday morning. My dilemma, either go flat and trigger the rule or hold over the weekend and face a potential market meltdown on Monday. Riding the 4 trade limit for the past couple of weeks and having given back hundreds in gains by being forced to hold over night or trigger the rule--right now I'd gladly trade my position for a $500 loss, just for peace of mind and to avoid exposure on market open on Monday.

In the current market, with the extreme volatility, I've never seen greater risk/reward opportunities. The irony is that I just had a CD mature and will cover the $25k requirement on Monday IF I don't get nailed with a big market open down on Monday. My point is that even conservative swing traders such as myself in a volatile market such as we now have are presented with the dilemma of either protecting profits and cutting losses or losing profits and increasing losses by this rule.

Well, I'm capitulating. A severe sell off on Monday will lose my broker a very active trader or conversely, if the market holds, I am forced to have what will often be dead money sitting in my account. The rule is stupid--no one can override the old saying "a fool and his money are soon parted" by hurting the rest of us.

donald cornett

where can I get level-2

van cornelius

Amen. It makes my blood boil that the jackasses limit my freedom to determine what risks I can take and to get out of a trades when I want to.
Do they think that they are officials in the old USSR. Why has a massive protest of daytraders against this adomination not been mounted? How could this be done? Call your reprentatives in Congres!!!!!!!!!!! Has any group been formed to protest this nonsense?

Larry

I have always believed that the day trading rule is anti-small business. Think about it, does the government regulate how much money you can invest in and use to further any other type of business? The SEC, in creating this rule, is trying to prevent gamblers and the inexperienced from losing their money. Fine. Any professional trader will tell you, YOU WILL lose money when in the learning process. Even if you're not day trading you can STILL lose money in the stock market. LOL did I even need to say that? In order to get better a trader has to learn from experience. That's the reality of the business, and for that matter any business. Do some companies that sell widgets lose money in the first few years of existence? Of course they do. For me, day trading is a business, but it doesn't mean a trader always makes a zillion trades per day. I usually make a maximum of 4 trades per day, and still this stupid rule would prevent me from furthering my business. People lose money in the stock market every day whether day trading or not. I am surprised this rule has stood for so long, and really surprised there hasn't been lawsuits based on unnecessary anti-business regulation to take it down. One compromise might be that if the trading entity is a business entity, ie, LLC, S-corp, etc, the rule would not apply. It's just a business trying to make money like any other business. And, the fact you formed an entity means you're serious. It's so easy to knock down the reasoning behind this rule. People need to write their local congressman and knock it down once and for all.

Larry

I forgot to mention in my reply that with the advent of simulation trading, one can now learn trading without losing any money. Simulation trading has in my opinion revolutionized the odds of success for anyone getting into this business.

Paul

The logic doesn't wash! The part that you are leaving out is the margin requirement. If they are out to protect investors, why do they require it be a margin account. This is the only way that you can lose more than you have. The rule is meant to keep traders with limited capital from getting in and out with small unnoticed (profitable) trades. It is about protecting the big guy not the small guy. It is typical American Aristocratic BS.

Jon

This rule has cost me so much money!!

I need to find Bin laden and hire him to off all the SEC board with my $23,000

MAD as HELL!!

van

I agree. The day trade rule is stupid. Now they are about to adopt a rule limiting short selling. This all because a bunch of ignorant policians want to score points with their ignorant consituents. How about some leadership fo a change? They can protect traders by simply requiring that they be warned of risks, but allowing them the freedom to choose what risks to take. Tne SEC seems to base its rules more on politics than on reson and fairness.

Van

By the way, once the SEC comes out with proposed short-selling rules br sure to sent you comments to their websites,

I don't bevlieve that short-selling drives down stocks any more then buying a hot stock drives up the stock. Plus short sellers are traders (not investers) , so that when they short sell, they are creating a buy in the probably near future, thus providing future price support.

Van Cornelius

The SEC is now taking comments on proposed short-selling rules. Please consider submitting your comments. You could, while you are at it, lambash the stupid pattern day trading rule. I just did. Read my comments on their site if ; you like.

soulartist

Well, I see the suffering here... let me summarize mine
1. Blocked from cutting my losses, being forced to hold on to losing trades because of someone's infinite stupidity or evil, I do not know, even as my small pie gets smaller
2. Unable to book profits, of course, especially on above 15% a day breakouts
3. Unable to sell covered calls to lock profit in on breakout, having bought the call back in the morning before the breakout
4. Blocked from protecting my portfolio - unable to buy puts even as I see the market slide down, because I have already crossed my 'limit' of 4...

I understand this rule was put in place by SEC at the behest of NYSE and NASDAQ after the 2000 bubble burst.
I have written to the SEC, as I am sure many of you have, but is anything happening at all?

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Who Is Timothy Sykes And Why Should I Care?

See Tim's full bio HERE. Tim turned a few thousand dollars into a few million by taking small gains time after time on hundreds of volatile penny stocks, discovering that his trading strategy, while consistently successful, works best for those with smaller accounts.

Determined to teach others this PennyStocking trading strategy (learn more HERE), he went back to his original $12,415 roots (already $58,000+ even though the stock market has crashed) to show everyone how to turn thousands into millions, even while having a life (somewhat) and making plenty of mistakes. Currently he is the #1 ranked trader out of 25,000+ on Covestor)

How Can I Consistently Make Money In The Stock Market?

Hard work, Determination and Know How.

Hard work to learn how the greatly misunderstood niche of penny stocks provides opportunities every now and then on which you should pounce.

Determination to seek those probable profits out and know how in order to actually profit from them.

Long story short, wait for stocks that are extremely volatile - for whatever reason - and then aim to take small profits (between 10 and 50% within a few hours, days or weeks) here and there, either from betting on higher or lower prices (yes, you can make $ betting on lower prices, it's called Shortstocking (learn more HERE).

Why Penny Stocks?

As Tim explains in several ALL-NEW instructional DVDs (see them HERE) and in over 2000+ blog posts, penny stocks are the most hyped and corrupt niche in the entire investment world. These two qualities make them the easiest to profit from (legally) because the vast majority of people who play penny stocks are suckers and all-around ignorant people. If you have any intelligence whatsoever, you have a clear advantage and it's like playing basketball against mental midgets.

Where Do You Find Stocks To Trade?

This is the #1 FAQ (see more HERE) and it is answered in THIS instructional DVD.

Of course, that's just a brief introduction - to receive a full education, there is Tim's book An American Hedge Fund which is the story of his remarkable rise and lessons learned.

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TIM Trades

View All

Date	Stock	Buy	Sell	Net
Nov 6	QXM	$4.31	$4.80	$1936
Nov 4	COT	$8.66	$8.88	$642
Nov 4	QXM	$4.61	$4.89	$822
Oct 30	DDRX	$25.70	$26.53	$812
Oct 29	CTDC	$4.00	$4.42	$781
Oct 26	AWSL	$3.24	$4.10	$2516
Oct 23	RODM	$5.27	$5.23	$301
Oct 22	AMLM	$2.69	$2.97	$820
Oct 22	USEG	$6.12	$6.09	$85
Oct 20	CBOU	$8.93	$9.06	$243
Oct 16	VRMLQ	$16.79	$18.65	$2773
Oct 13	YONG	$11.05	$11.66	$1202
Oct 13	NPHC	$0.59	$0.71	$583
Oct 12	IMGG	$0.60	$0.70	$682
Oct 9	ZAGG	$5.50	$6.10	$2380
Oct 7	GVBP	$0.03	$0.27	$702
Oct 1	NPHC	$0.70	$0.85	$1482

Total: $92,304 (644%)