This Day Trading Risk Disclosure applies to all margin accounts by Ram Financial LLC (“Ram”). Ram DOES NOT PROMOTE DAY TRADING. Investors should consider their investment objectives and risks carefully before investing. If a customer engages in day trading via a margin account, the following rules apply.
Day Trading Rules
Definition
A “Day Trade” is the purchase and sale of the same stock or ETF on the same business day in a margin account.
You’ll be flagged as a “Pattern Day Trader” if you execute four (4) or more Day Trades within five (5) consecutive business days.
Minimum Account Equity
If the trading activity in your account results in a “Pattern Day Trader” designation, you must close the business day with at least $25,000 in cash and securities (exclusive of Treasury bills, cryptocurrencies, or alternative assets) to maintain day trading privileges for the following trading day.
If you are marked as a Pattern Day Trader and you do not maintain the minimum $25,000 requirement, then your next Day Trade will result in your account being restricted to “Sell Only” status until ninety (90) days have passed since your last Day Trade.
Day-Trading Risk Disclosure Statement
You should consider the following points before engaging in a day-‐trading strategy. For purposes of this notice, a “day trading strategy” means an overall trading strategy characterized by the regular transmission by a customer of intra-‐day orders to effect both purchase and sale transactions in the same security or securities.
Day trading can be extremely risky. Day trading, generally, is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-‐trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more in no way guarantees success.
Be cautious of claims of large profits from day trading. You should be wary of advertisements or other statements that emphasize the potential for large profits as a result of day trading. Day trading can lead to large and immediate financial losses.
Day trading requires knowledge of securities markets. Day trading requires in-‐depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.
Day trading requires knowledge of a firm’s operations. You should be familiar with a securities firm’s business practices, including the operation of the firm’s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures.
Day trading will generate substantial commissions, even if the per trade cost is low. Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings.
Day trading on margin or short selling may result in losses beyond your initial investment. When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short position.
Potential Registration Requirements. Persons providing investment advice for others or managing securities account for others may need to register as either an “Investment Advisor” under the Investment Advisors Act of 1940 or as a “Broker” or “Dealer” under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirement.