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 will in no way guarantee 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 in day trading.
Day trading can also 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 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. For instance, assuming that
a trade costs $16 and an average of 29 transactions are conducted per day, an investor
would need to generate an annual profit of $111,360 just to cover commission expenses.
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 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 accounts for others may need to register as either an “Investment
Advisor” under the Investment Advisor Act of 1940 or as a “Broker” of “Dealer” under
the Securities Exchange Act of 1934. Such activities may also trigger state registration
I ACKNOWLEDGE THAT I HAVE RECEIVED, READ, AND UNDERSTOOD THIS DAY TRADING ADDITIONAL
RISK DISCLOSURE DOCUMENT, AND AGREE TO INDEMNIFY AND HOLD HARMLESS AOS AND ITS AGENTS
FOR THE RESULTS OF TRADING IN MY ACCOUNT.