Discussion in 'Trading' started by Vicktrade, Feb 22, 2004.

  1. Vicktrade


    Why are underfinanced active traders restricted by the powers that be? If I have $10,000 in my account, why can't I make 100 trades/day without restriction. Also, in this computer age, why does it take days for a trade to "settle"? Shouldn't I be able to trade in an unlimited manner as long as there are funds available to do so?:confused:
  2. buster


    PDT should be illegal
  3. prox


    Trade another vehicle..

    most people that daytrade stocks end up losing
    most people that are undercapped end up losing

    I think the rules were a meant to protect the little guy in some deluded kind of way.
  4. It may be true that the PDT was created to protect the little guy from screwing up so quickly but it's also to protect the SEC from complaints from those who screwed up and their relatives or lawyers.

  5. http://www.elitetrader.com/vb/showthread.php?s=&postid=401436&highlight=PDT#post401436

    Quote from hii a_ooiioo_a:

    The PDT rule claims to be to protect the undercapitalized trader from himself. But what it does is protect the "House" from the smaller but damaging possibility of those who have come into the casino with practically nothing, and managing to propel their winnings, so that they remove disproportionate amounts of capital from the game.

    Having removed that threat, the PDT goes on to require that any unrestricted player must bring a minimum $25,000 ante to the table.

    Then, they give 4:1 margin to those players who bring that $25,000. This is equivalent to the casinos giving bonus chips and free drinks to gamblers. More chance of them losing their $25,000 back to the tables, which gives the house more time for the game to continue.

    But after a year, they found that even that was not enough. They found they needed to also include Options in the PDT restrictions. Why? Because options create great leverage without the use of margin. Once again, the damaging possibility that someone could come into the game with practically nothing, and start removing disproportionate amounts of capital. The absence of margin in buying Options means that the options trader is not at risk of being squeezed out of their bets by margin calls.

    They had to restrict options trading to protect the house's capital and keep the game going.

    Casinos know what they're doing when they make their rules!