I don’t get why the rules are necessary. Who gets hurt if I sell with a purchase made with unsettled funds. And why should day trading be restricted.
Trading indicators are best used along with money management and good risk control, using trading indicators alone will not enable you to be a successful trader, even if you learn everything about day trading the market is just too random and unless risk is controlled, over time your account will slowly get wiped out, regardless how good a “trader” you think you are.
This question was about day trading and there have been some pretty good answers that should help in your trading, and especially in relation to day trading, the answer has been posted in the categories listed below:
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The people with money make the rules. In this case, the people with more money have a HUGE advantage.
They are limited the unsettled risk pool for all investors.
The nightmare settlement scenario is massive daily losses compounded (day after day) by individuals who do not have the cash to meet a margin call. If even a few settlements cannot occur or are delayed, it messes up the entire system…potentially crippling it.
The point — I’m guessing — that you are missing is that settlement is really a gentleman’s trust agreement, not an iron clad rule of law (like bank clearing within the US, for example). A couple of bad apples or a player who games the system, has the potential to bring the whole thing down, That is exactly what happened, BTW, with the ARS and CDS systems in 2008-9. Day traders are a particularly big risk for both, thus the limits.