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Yup I said it. While making a nice quick 5+% American profit, or $350ish, in an hour on my LGDI trade a few weeks ago, my blood boiled over due to the missed opportunities caused by the SEC’s pattern day trading rule. And while I’ve attacked it in the past, there was no formal summary post that explained all my key points. Considering how many stocks are in play today and the fact that I am forced to ignore 99% of them, it’s time I unleash this fury.

The formal definition of this inane rule is HERE, and once you read it, you’ll begin to understand why I call it the Reign Of Terror Rule. In fact, I’ve got an entire category devoted to it as I’ve documented each and every time it’s interfered with my trading since I began TIM in November 2007.

Basically, if your trading account is below $25,000—as are the accounts of so many poor people out there—you can only day trade (meaning in and out the same day) 4 times per week. If you trade more than that, you get flagged as a pattern day trader and your account gets restricted because you’re considered evil, as most day traders are believed to be. (Yes sometimes you can trade a few more times than that—since its all rather gray area and the brokerage firms themselves despise this rule—but my point is there should be no limits whatsoever!)

Even though I’ve still got over $500,000 in liquid cash to trade with, I went back to my $12,415 roots specifically to draw attention to this injustice because most people, including industry big wigs, don’t even know about it. After all, the last time I had this little money, it hadn’t been instituted and I’m forever thankful since trading freedom allowed me to get rich.

Now, in my quest to repeat my feat of turning thousands into millions, I’m only up 50% in 7 months, thanks in large part to the obstacles created by this rule, whereas if I wasn’t chained down, it’d be more like 100-200% maybe even 300%. No joke—click that category above and see what kind of crap with which I’ve had to deal.

I know from countless blog post comments and emails from you guys—even you non-trading addicts out there—that it’s absolute hell for you too. So, in the comments section of this post, please write about any and all experiences with this rule in order for the freedom-hating SEC can better understand the problem. Sad to say, but I think the only way to get the attention of these terrorists—and that’s what they are, using this rule to attack wannabe day traders everywhere because they disapprove of our values— is if the comments section of this post surpasses the 9/11 body count, which was 2,974. But since this is about one of our great nation’s most important ideals—freedom—it’s imperative that we succeed and show these terrorists what we’re really made of!

Please be honest—thanks to all the easy money that causes us to act like immature pricks (see EliteTrader.com and my inappropriate terrorist comments (although this is what it’s gonna take to get people’s attention….sadly)), we day traders already have a bad enough reputation.

Here, I’ll start—See some examples of what I’m talking about HERE, HERE, HERE, HERE and HERE and that’s all just in the last few weeks! Feel free to refer to problem # in your comments if you have similar experiences/thoughts:

Problem #1: Like limiting a painter to a certain number of brushstrokes

Day trading is all about trial and error—it’s best to test out the waters with small positions, scaling in and out depending on the price action. When I’m limited to one position per day—at most—I’m forced to be perfect in my timing, which not only is incredibly difficult, if not impossible, but because I’m trading smallcaps and microcaps, this rule has made this game more dangerous than it has to be. Like painting, trading is an art—can you imagine a rule where an artist was limited to 1 brushstroke/day? The painting not only would take forever but it would suck! This is wrong. I am most profitable when I can scale in and out easily, cut my losses quickly and re-enter when the price action is more to my liking.

Problem #2: Hurts Profit Potential

Since microcaps and smallcaps are somewhat illiquid, worthy trading opportunities come about only so often and when they do, they usually come in bunches. Thanks to this injustice, I often find myself unable to trade all the worthy opportunities out there, hurting my profit potential.

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Problem #3: It’s Gosh Darn Un-American!

Uhhh, isn’t this a free country? Shouldn’t we be able to get rich in the stock market? I got rich by trading thousands upon thousands of stocks and I made plenty of mistakes because thanks to any other ridiculous SEC regulations, there was no way for me to ever find/have a mentor. Now that I am that mentor that soooo many people need—teaching PennyStocking to anyone interested—the SEC has this rule that basically says the way I got rich in 4 years—playing the allegedly most random /dangerous stocks in the world and without using leverage—is too dangerous?!?!? Oh no you didn’t! My strategies are still gonna make people rich—quicker than most—but thanks to these SEC Bin-Laden-like-freedom-hating bastards, it’s just gonna take people with under $25,000 a little longer.

Problem #4: Hurts Short Sellers Who Add Market Liquidity

That’s right I said it, short sellers are good for markets—despite all the crap we take, we bring reason and liquidity into one sided markets, especially those that are filled with hype and manipulation like the penny stock market!

Problem #5: Punishes the wrong people

I understand this rule is supposed to protect those who can’t afford to lose much money and since they have little $, they are assumed to be unsophisticated traders/investors (who besides crazy TIM doesn’t use all their $ just to prove a point like this?!?!), but this rule is only applicable to those of us who trade securities—by and large who don’t even use leverage—while allowing traders in infinitely more dangerous niches total freedom. Those are the guys about which Osama Bin SEC should worry—their trading has proven capable of bringing down legendary institutions HERE and HERE and economic collapse!

So,go on and leave short or long comments, but comment often—in the words of William Wallace, I say to you “Aye, fight the SEC and your future in the financial industry may die. Run, and it’ll live… at least a while. And dying in your firms, many years from now, would you be willin’ to trade ALL the days, from this day to that, for one chance, just one chance, to come back here and tell Osama Bin SEC that they may regulate our industry, but they’ll never regulate… OUR FREEDOM!

Posted in Analogies, Basics, Criminals, Pattern Day Trader Rule, Rants

Tags: Analogies, Basics, Criminals, Pattern Day Trader Rule, Rants