Death Blow to DayTraders

Here is what I've been able to find out about the status of the proposed margin rule changes.

On March 1, 2001, the SEC approved the proposed margin rule changes and granted accelerated approval to the amendments to each proposed rule change submitted by the NYSE (SR-NYSE-99-47) and the NASD (SR-NASD-00-03). See Rel. 34-44009 as reported in the March 1, 2001 issue of SEC News Digest (Issue 2001-41). Essentially, the SEC found that it could do away with the usual comment period for the proposed amendments as they brought into uniformity the respective proposals of the NYSE and the NASD. (Most notable in the NASD's amendment was the deletion of the 90-day exception to the definition of a pattern day trader.)

The SEC's approval of the proposed rule change was reported in the March 6, 2001 issue of the Federal Register, vol. 66, no. 44, pp. 13608-13618. Barring any further delays, the NYSE proposal would be operative six months from this date. The NASD proposal would be operative six months from the date the NASD issues a notice to its members announcing the SEC's approval. To my knowledge, the NASD has yet to issue such a notice, but I expect it is soon forthcoming and probably will be posted on its website. (The difference in treatment is because the NASD is a self-regulatory organization.)

It is possible that these dates may change, for there seems to be some concern about the practical burden of implementing the proposed rules, as they may require systems changes by securities firms. But for now, the six month period is considered sufficient time for firms to adopt measures to enforce the new rules. I think we can expect to hear more about these new rules prior to their implementation.


 
Squirel, I thought I'd take some time to help guide you in the quest to be a consistenly successful trader. You are very wise for learning first before you get into the market. although you will still give tuition to me and all the other succeful traders out there it should be considerably less.....I want to stress how much your mental will determine your success as a trader. For me it was more than half the battle. As a newcomer to this game you probably haven't given much thought to the subject, for you have more than likely been sucking up as much knowledge as possible about the analysis. But you must and i can't stress must enough understand the dynamics of your mental state and attitude before you will ever have a chance at becoming truly successful at this. There are many books on the subject by far the best of which i believe is trading in the zone by marc douglas.....if you read and constantly re-read this book and practice the concepts and lessons in this book you should be able to enjoy as much success and enjoyment from this game as i do.

As an example of how much your mental can determine your success take me as an example. I have been using the same set-ups and strategies for over 2 years now....when i first started my account was growing but with erratic equity swings. I had all theese set-ups and all theese strategies that worked so well and yet I still could not make consistent money with a steadily rising equity that only experienced drawdowns due to normal drawdowns any edge will exoerience. When I finaly realized that the problem was not at all with analysis or the set-ups I was using and with the attitude and mental state in which i was using them, the difference on my bottom line was more then dramatic. I have now made over 20% on my equity, every month except for one int the last 13 months...I have made six figures in the last 3 months....I knew that I could eventualy get to this state of consistent success, but it was not until i tackled theese mental problems and practiced them on a daily basis that I was actuly able to get there......READ TRADING IN THE ZONE!!!!!
and ask any truly successful trader on this board or anyother an im sure they will agree that this is an enormous element to their success. also read trade your way to financial freedom as that too is essential to all new comers goodluck and i wish you the best of luck

PEACE COMMISSO
 
Originally posted by Cesko
I was thinking the same. Actually, haven't the futures contracts on stocks been approved already?
More...

Single-stock futures have been approved and will probably start trading in the US shortly after this margin rule goes into effect. However, I am not convinced SSFs will be as great as some claim - there have been some pretty big liquidity problems with the ones that currently trade in other countries (i.e. nobody is trading them :).
 
Commisso,,,
Thanks for the input,,,, and yes,,you are right,,,I'm sure I have no clue as to the intense mental discipline that it will take to become consistantly successful once I start... I have many books on my list to read and re-read.. I used to shoot pool for a living and I do in a way understand the mental strain that is involved by putting ones money on the line and controlling the losses... But in THAT game,,when you win or lose,,money changes hands right there....It's different when you are in control of money that you can't see or touch...I can see where a lot of people would lose touch with the meaning of monetary value...

I realize that I have long road ahead...I am just hoping that they don't start over-regulating this for everyone...I seem to have a feeling that once this new rule is imposed,,,,there will probably be less people prone to lose money,,,,but the ones that do are going to lose bigger... So what's the tradeoff ??? I will not go in unprepared,,, I just hope you guys are still around when I dive !!!! Thanks
 
The new margin rules will prohibit margin in any account less than $25k .... so for people with less than 25k they have to use a cash account.... BUT in a cash account you are not allowed to daytrade... so daytrading won't be allowed for ppl with less than 25k .... ppl with less than 25k must swingtrade
 
candletrader,

That is incorrect. Accounts with less than $25K can still use margin, they just cannot daytrade. So if you are a multiday swing trader, an options seller, or even an investor who wants to buy or short on margin and your account is less than $25K, you still can. You'll only get into trouble if you get pegged as a daytrader by doing 4 or more daytrades in a 5 day period. So even if you daytraded 3 times in a 5 day period, you'd still be fine and could use your margin all you want.
 
It occurs to me that once this rule goes into effect a lot of daytraders that use margin will start to begin to trade lower priced stocks because of the lack of margin.

I wonder if anyone at the SEC stopped to think of the ramifications of the new margin rules. I bet it increases volatility in stocks under $10. It will be interesting to see.
 
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