ANNOUNCEMENT- seeking traders interested in overturning the PDT rule

Quote from riskarb:

How would you define a rule-based system that would place a limit on opening transactions? What if you're trading a $10k account and structuring a buy and hold portfolio of odd-lots in 60 issues? How to distinguish between the PDT and a passive investor?

I agree that the rule is absurd and poorly conceived. Why penalize successful but undercapitalized traders? A loss-limit is problematic. I believe that extending the term to 30d and increasing the # trades which qualify would be an improvement. If nothing else it would represent a more statistically-valid sample of the trader's buy/sell pattern.

The PDT is detrimental to daytraders and passive investors alike, but it's not likely to be reversed until the SEC makes some internal changes. A move towards SPAN for equity markets will be a seed-change.
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I have no idea, but I'm sure there is a way it could be done. To me, it just seems silly to limit how many positions someone can close per day in an attempt at protecting them. I think the focus should be on limiting them from opening positions instead.

Anyway, I support changing it, but I don't know how it should look when it's finished. A better focus on actually protecting the investor would be a good start however.

- The New Guy
 
Quote from lakka:

Quote from riskarb:
I think you're all missing the point of PDT. The SEC is fully aware that anyone affected by PDT would prefer not to be. The SEC philosophy is to protect you from yourselves.


As iceman already have pointed out ; alltough the intention and philosophy of protection might be good it does not achive its purpose and is probably doing more harm than good.
So I do not think we are missing the point. This rule is not very well thought out. If they could adjust and apply this rule to daytrading only it will get closer to it's philosophy.
But as it is now, position trading are affected also. A few stops and some errors and the account is locked.
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exactly
 
Quote from lakka:

A few stops and some errors and the account is locked.
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You hit the nail right on the head, except that at least IB and Tradestation have it coded in the system to not let you open that 4th trade... so you don't have to worry about being locked for 90 days.

Anyway, I'm a swing trader... I get whipsawed, and have to exit a losing trade. That takes up one full turn. I already have two round turns in the last three days...

Here's an example -- When I got signalled to go short during one day in January on VC back about a month ago, I couldn't because of the PDT rule...

Guess what? I lost "what could've been", $6000 in profits!

I have lost in the last three months, nearly $1500 in whipsaws and a few mistakes. But I've also lost a total of $8000 in trades that I would've made had it not been for the PDT rule...

Whipsaws before the beginning of a trend is all part of the game. The PDT rule and it's limiting factor should not!

The PDT rule then causes you to make mistakes because psychologically, you're trying to make something out of every single trade. You're starting to commit the exact mistakes you know you're not supposed to commit, but it's hard not to when you know that you have to make the most of every trade or you're screwed. So what do you do? You scale back on your trades, or you start trading only one or two stocks at a time. That then opens you to risk, because you're not diversified.

So not only does a swing trader / trend follower have low odds of success anyway (30-40%), of which we require the big homeruns to make money, we also have mental mistakes, psychological errors, AND, the PDT rule.

So basically, you have about a 10% chance to win at the game. If you're a Mark Douglas and got your head on right, you can up the odds to 20-25%... that's still ok as a trend follower, as long as you're getting big wins...

So what am I doing? Simple. I'm scaling back on risk capital, and trading my #1 stock that I know has done well for the last five years in my system.

That's all I can do. I just accept the risk of being in one stock overnight. I put my strategy on automation, check it throughout the day, and hope that I don't get whipsawed.
 
Quote from sirpangolin:

You hit the nail right on the head, except that at least IB and Tradestation have it coded in the system to not let you open that 4th trade... so you don't have to worry about being locked for 90 days.

Anyway, I'm a swing trader... I get whipsawed, and have to exit a losing trade. That takes up one full turn. I already have two round turns in the last three days...

Here's an example -- When I got signaled to go short during one day in January on VC back about a month ago, I couldn't because of the PDT rule...

Guess what? I lost "what could've been", $6000 in profits!

I have lost in the last three months, nearly $1500 in whipsaws and a few mistakes. But I've also lost a total of $8000 in trades that I would've been in if not for the PDT rule...

The PDT rule then causes you to make mistakes because psychologically, you're trying to make something out of every single trade. You're starting to commit the exact mistakes you know you're not supposed to commit, but it's hard not to when you know that you have to make the most of every trade or you're screwed. So what do you do? You scale back on your trades, or you start trading only one or two stocks at a time. That then opens you to risk, because you're not diversified.

So not only does a swing trader / trend follower have low odds of success anyway (30-40%), of which we require the big homeruns to make money, we also have mental mistakes, psychological errors, AND, the PDT rule.

So basically, you have about a 10% chance to win at the game. If you're a Mark Douglas and got your head on right, you can up the odds to 20-25%... that's still ok as a trend follower, as long as you're getting big wins...

So what am I doing? Simple. I'm scaling back on risk capital, and trading my #1 stock that I know has done well for the last five years in my system.

That's all I can do. I just accept the risk of being in one stock overnight. I put my strategy on automation, check it throughout the day, and hope that I don't get whipsawed.
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Thanks for the anecdotal comments.

You should be "MAD as Hell AND not gonna take it anymore!"

So, are you going to send us your name and contact info. We need all the "troops" we can get. Just PM me - I'll acknowledge!

It doesn't pay to moan about something wrong with the Country or its' laws or policies unless and until you are willing to make an effort to protest it. IF it were not for strong citizen protest we would still be fighting the immoral Vietnam War. :eek: :eek:

"you don't need a weatherman to know which way the wind blows" -- Subterranean Homesick Blues/Dylan

Thanks
 
Quote from Bitstream:

this rule is just laughable, how do u explain the fact
u can do as many transaction as u wish on futs?
incoherent and absurd
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Thanks for the word

"incoherent"

Now that almost adequately depicts the ineptness and short-sightedness of this PDT rule, and of those who came up with the concept! But still not strong enough. :eek:
 
2 15 06

--- Notice---


Anyone who wants their name and address on the letters I plan on sending as our first salvo to all concerned agencies, the Securities Inudustry Association and the Counsel for some major brokerages, please be sure to email me with details, stat!

IF you already emailed/PMd me I will include you on the list.

BEFORE any letters are sent I will send copies thereof to all those who wish to be named for prior approval of the contents thereof.

Further IF any concerned trader who has been impacted by PDT at anytime can locate ANY statistics (or articles) as to how many day traders there are estimated to be in the USA -- and can post a link to any such data and/or anything else they deem pertinent to this cause, it would be appreciated.

We have some excellent Net surfers on ET so any research as aforesaid is most appreciated.
 
Federal Register notice - NASD

February 2000

includes "reasons" for seeking Rule approval

http://www.nasd.com/web/groups/rules_regs/documents/rule_filing/nasdw_000879.pdf


Get this -- (don't laugh too loud or puke guys)


"First, the proposed rule change would
amend the definition of ‘‘pattern day
trader’’ to cover

>>>only true day traders.

>>>>Day-trading margin requirements should
be imposed only on true day traders, not
just incidental or occasional day traders.

>>> NASD Regulation believes that the
current definition is too broad because
it includes customers, such as
institutions and other large individual
accounts, that have a high volume of
trading activity and that occasionally
day trade, not as a strategy, but in
response to a specific investment
decision or in reaction to events.

(emphasis added)

Accordingly, under the proposal day
traders would be defined as those
customers who day trade four or more
times in five business days, unless their
day-trading activities do not exceed 6%
of their total trading activity for that
period.

Additionally, the proposal requires a
firm that knows or has a reasonable
basis to believe that the customer is a
pattern day trader, to designate the
customer as a pattern day trader
immediately, instead of delaying such
determination for five business days. A
firm would have a reasonable basis for
believing that a customer is a pattern
day trader if, for example, the firm
provided training to the customer on
day trading in anticipation of the
customer opening an account. If a
pattern day trader does not day trade for
a 90-day period, he or she will no longer
be considered a pattern day trader.
 
Also notice how most brokers likely disregard the "6% OR LESS OF TOTAL day trades for the five business day period" paragraph of said PDT rule!

What is 6% of a 100 weekly trades ? Of 200? I bet if an account trades 200 times overnight - yet made 4 "day" trades in 5 days their account would be locked up. But according to the Rule it was allowed 11 day trades that period.

I could be wrong but I see nothing reagrding the 6% OF TOTAL at one of the major brokers who automatically has THREE as the magic number regardless whether the account did 500 other trades that 5 day period. In fact this broker automatically disallows that account from doing a 4th trade.

Very curious to know if their algorithm calculates this 6% figure first before locking up the account for 5 days.
 
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