Day-Trading Disclosure Statement

 

PLEASE REVIEW THE FOLLOWING DISCLOSURES CAREFULLY BEFORE ENGAGING IN A DAY-TRADING STRATEGY.

 

Last Updated: April 30, 2025

A “Day-Trading Strategy” refers to the frequent transmission of intra-day orders by a customer to execute both purchase and sale transactions within the same security or multiple securities. Day trading involves significant financial risk and may not be suitable for all investors.

Day Trading Involves High Risks

  • Day trading is generally not appropriate for individuals with limited financial resources, low risk tolerance, or minimal trading experience.

  • You should be prepared to lose all funds dedicated to day trading.

  • Day trading should not be financed with retirement savings, student loans, emergency funds, second mortgages, or other critical financial resources.

  • Studies indicate that investing less than $50,000 in day trading may significantly reduce profitability, though no investment level guarantees success.

Be Wary of Promises of Large Profits

  • Advertisements suggesting consistent profits from day trading can be misleading.

  • Many day traders experience substantial financial losses rather than gains.

Market Knowledge & Trading Expertise Required

  • Day trading requires an in-depth understanding of market mechanics, trading strategies, and execution techniques.

  • You are competing against professional, experienced traders, including automated high-frequency trading systems.

System & Market Risks Can Impact Trading

  • You should be familiar with the firm’s trading systems, execution methods, and potential system failures.

  • Market volatility can make it difficult or impossible to exit positions at expected prices.

  • Technical failures may exacerbate losses during sudden market declines or disruptions.

Commissions & Fees Can Reduce Earnings

  • Frequent trading generates substantial commission costs, even when fees per trade appear low.

  • Example: If each trade costs $16 and a trader makes 29 trades daily, they would need to generate at least $111,360 annually just to cover commission costs.

Margin Trading & Short Selling Increase Risk

  • Trading on margin can result in losses exceeding initial investments.

  • Declines in stock value may require additional margin deposits or result in forced liquidations.

  • Short selling carries extreme risk, as stocks can rise indefinitely, leading to significant losses.

Pattern Day Trader (“PDT”) Designation & Risk

Criteria for a Pattern Day Trader

Under FINRA Rule 4210, a PDT is defined as an individual who:

  • Executes four or more day trades within five business days in a margin account.

  • Has day trading activity that exceeds 6% of total trades in that account within the five-day period. Once designated as a PDT, a trader becomes subject to stricter financial requirements.

PDT Financial Obligations & Restrictions

  • Minimum Equity Requirement – PDT accounts must maintain at least $25,000 in equity at all times.

  • Margin Requirements – PDTs are subject to higher margin requirements, increasing potential losses.

  • Trading Limitations – If the account equity falls below $25,000, day trading may be restricted until funds are replenished.

  • Margin Calls – PDT accounts may be subject to immediate margin calls if trades exceed available buying power.

Potential Consequences of Failing to Meet PDT Requirements

  • Account Restrictions – Traders who fail to meet the PDT minimum equity rule may be restricted from day trading for up to 90 days unless additional funds are deposited.

  • Forced Liquidation – If a trader cannot satisfy a margin call, the broker may automatically liquidate positions to meet the required balance.

  • Regulatory Scrutiny – FINRA enforces PDT regulations to protect traders from excessive risk, and firms may conduct additional oversight of PDT accounts.

Potential Registration Requirements

Individuals offering investment advice or managing securities accounts for others may need to register as:

  • An Investment Adviser under the Investment Advisers Act of 1940

  • A Broker or Dealer under the Securities Exchange Act of 1934

  • State registration requirements may also apply

For additional information or regulatory guidance, consult FINRA (FINRA.Org), the SEC (SEC.Gov), or a qualified financial professional.