Robert, The statement "I prefer that risk" is one every trader needs to make for themselves. I agree with you there. But we do as human beings have a bias that makes it difficult to imagine that something out of the bounds of probabilty will happen to us if we are involved. I can't remember the name of this specific bias. I know Van Tharp speaks about it. I am not saying that one should plan their lives around such events, but to not consider them before making an informed decision is naive at best. The last year has shown that boundaries of probability are elastic. They are exceeded, tested and stretched much like the market itself. While planning for risk is a macro-level activity, implementing it is a micro-level activity. Unless you are there at the business watching the risk controls implemented and know intimately the kinds and types of risk the company is dealing with (much like knowing the distribution of the R multiples) the best you can say is the risk is not knowable and there are no guarentees.
andrasnm they are Pacific Stock Exchange There is a risk here, I'm not saying there isn't. I feel that the risk is a manageable one if you allow it to be. rtharp
Why not just put up your own $1 million in trading capital and eliminate LLC risk all together! Because you don't have the money? Then stop crying about the highly unlikely chance of a reputable BD going under and start trading already.
seriously, risk should be taken witd rewards. 5:1 margin is pissant compared to trade with say IB doing futures. IB is not insured but when you say reputable BD you must be jesting. Some of these firms crawl out of a rock and bust than change names and start over ! I am not going to name and names buy "buyer beware" and shop around for LLC.
rtharp, this is one argument I don't want to get involved with right now. But, I have to correct you, IB is SIPC insured (it is on the bottom of the front page of the web site). The firm is keenly aware of the risks of handling client money and therefore has the auto-liquidation policy and other built in protections.
I asked on IB Chat about the SIPC insurance. They gave me http://www.interactivebrokers.com/html/companyInfo/disclaimer.html They say that they have the $500,000 per account mentioned in the disclaimer -- which is the maximum SIPC basic coverage. To def, I think you do a great job representing IB. I hope they realize it.
Is there anything that can legally keep ECHO from getting insurance coverage at least against management fraud ? (Trading risk at least in some portion is covered by risk software) PKJR
Can anyone tell me what tax advantages there are when you trade as a member of an LLC? This was something that was mentioned in the article in Active Trader a couple of months ago.