APPENDIX A
Decision Tree Controlling Transition of Day Trading Accounts
A more detailed discussion of the transition of day trading accounts is presented here in the context of the sample retirement savings account inventory first presented in Table 8.1 of this book. This transition becomes necessary when the cash or stock in one of the two primary trading accounts is exhausted.
Initially, for each daily rise in the market, you would sell stock by transferring assets in stock-rich account AT from stock to cash. For each daily decline in the market, you would buy stock by transferring assets in flush-with-cash account BG from cash to stock. You hold account CS, with its more balanced holdings in stock and cash, in reserve until either account AT's stock or account BG's cash is depleted.
If account AT's stock is depleted before account BG's cash, account CS will replace account AT as the fund from which stock is transferred to cash every time the market rises. The newly cash-rich account AT is then left to rest in trading limbo until such time as any applicable trading restrictions have lapsed. Only then may it be used as necessary to relieve an account BG fully or partially depleted in cash. If account BG's cash subsequently runs out before account CS's stock does, a rested account AT with its replenished cash supply will be brought back to replace account BG to buy stock with cash every day the market declines. Alternatively, if account CS's stock is exhausted before account BG's ...
