I'm still trying to figure out what the real reason for the regulation is and who is actually supposed to benefit from it. It's obviously not "to protect traders with small accounts" as many people claim. Small traders do not benefit from this at all. There must be someone else who benefits, who?
If you really wanted to protect small, inexperienced traders who are trying to quit their day job, you would just prevent them from being able to leverage and prevent them from short selling. Those are the biggest reasons people lose their entire account and have to pay their broker. They are also the most prone to do risky things like bet double their account on some highly volatile penny, which they do because being conservative and smart with a small account only produces tiny gains, so in order to make any meaningful profit they need to go big.
Of course, that fact alone combined with being able to leverage and short destroys their accounts. Add on top of that the fact that they can only revoke a trade three times per week and will often hold onto losers (a classic don't) lest they give up one of their treasured day trades, and you have a trader who can do little but bleed what little money they have until they dry up.
On the other hand, if you simply prevented them from risky practices like leverage and allowed them to day trade, what would the worst that thing could happen? A bad trader simply trades until he runs out of money and quits, and a good trader makes small but steady gains. I doubt even a seasoned trader could significantly grow an account below 25k with the PDT Rule in place in a reasonable amount of time.
Without PDT Rule, traders who are willing to improve contribute to the market and steadily grow both their account and their knowledge, while traders who are just in it to gamble or buy lotto tickets get strangled, but don't end up in debt.
Instead, everyone who doesn't have 25k just sitting around basically has nothing to gain from trading and might as well just buy AMZN. I suspect the real reason has nothing to do with protecting anyone, and more to do with preventing Bob the burger flipper from discovering he's actually an amazing speculator and quitting his job at McD's to trade. Indeed if everyone could profit from trading no one would actually go to work for a fixed wage, and I think someone noticed this when the Y2K bubble happened and decided it would be best to prevent too many wannabe Wolves of Wall Street from just making an ETrade account and hitting it big.
Did I hit the nail on the head?
If you really wanted to protect small, inexperienced traders who are trying to quit their day job, you would just prevent them from being able to leverage and prevent them from short selling. Those are the biggest reasons people lose their entire account and have to pay their broker. They are also the most prone to do risky things like bet double their account on some highly volatile penny, which they do because being conservative and smart with a small account only produces tiny gains, so in order to make any meaningful profit they need to go big.
Of course, that fact alone combined with being able to leverage and short destroys their accounts. Add on top of that the fact that they can only revoke a trade three times per week and will often hold onto losers (a classic don't) lest they give up one of their treasured day trades, and you have a trader who can do little but bleed what little money they have until they dry up.
On the other hand, if you simply prevented them from risky practices like leverage and allowed them to day trade, what would the worst that thing could happen? A bad trader simply trades until he runs out of money and quits, and a good trader makes small but steady gains. I doubt even a seasoned trader could significantly grow an account below 25k with the PDT Rule in place in a reasonable amount of time.
Without PDT Rule, traders who are willing to improve contribute to the market and steadily grow both their account and their knowledge, while traders who are just in it to gamble or buy lotto tickets get strangled, but don't end up in debt.
Instead, everyone who doesn't have 25k just sitting around basically has nothing to gain from trading and might as well just buy AMZN. I suspect the real reason has nothing to do with protecting anyone, and more to do with preventing Bob the burger flipper from discovering he's actually an amazing speculator and quitting his job at McD's to trade. Indeed if everyone could profit from trading no one would actually go to work for a fixed wage, and I think someone noticed this when the Y2K bubble happened and decided it would be best to prevent too many wannabe Wolves of Wall Street from just making an ETrade account and hitting it big.
Did I hit the nail on the head?
