day traders

I have posted this before but thought I'd put it in a new thread explaining the process to people who weren't sure.

PRR has been going up for a couple of weeks now. But if you look at the charts closely, whilst it goes up for 2 days it tends to pull back on the 3rd. The reason for this is T+3 traders.

Many longterm holders such as myself look at it an just laugh it off, whilst newer holders panic.

How do T+3 traders work.

Assume today is Monday and you buy 100,000 shares at $0.20 each. These shares don't settle until Thursday, i.e you don't pay for them until Thursday morning. That means you have until Wednesday 4:10pm to sell them before you have to pay for them. On Wednesday the share price is sitting at 24c, so you sell them. Your net is $4,000. Your broker, 3 days from Wednesday sends you $4000 (assuming you have no other trades in the meantime).

Assuming the share price on Wednesday is $0.19 and you have to sell because you can't afford to pay for them on Thursday, you lose $1000 which your broker debits from your account Thursday morning.

This stock is fascinating. While several people are buying and holding waiting for NASDAQ etc, day traders have jumped on it and are looking to make a quick buck.

The drop this morning is totally expected. Some t+3 traders (I know a few of them), buy the sahres on Monday, sell on Wednesday, buy back on Wednesday, sell on Friday and they keep going like that. It means they never have to pay for the stock while trading it. They use their brokers money instead interest free. The downfall comes where we have 2 or 3 down days in a row and they are forced to sell for a big loss.

PRR for this year

Day 1 (4/1/11) High price $0.21, low $0.175, closing $0.20
Day 2 (5/1/11) High price $0.245, low $0.21, closing $0.225
Day 3 (6/1/11) *** T+3 traders foreced to exit High price $0.235, low $0.19, close $0.19

Day 1 (7/1/11) Traders start taking position again hoping for Weekend news. High $0.21, low $0.19, close $0.20
Day 2 (10/1/11) High price $0.25, low $0.205, close $0.25
Day 3 (11/1/11) ??? T+3 traders forced to exit after buying to avoid settlement. Depending on sentiment early drop will be wiped out with traders entering again today, otherwise up day tomorrow and Thursday, down day on Friday when t+3 traders exit on the 3rd day.

And the cycle continues. The only thing that will break this cycle is positive news which would see a huge push up.

As I mentioned earlier, longterm holders are unfazed by the day to day movements. Newer holders welcome aboard and don't panic. Day traders due this with all stocks that are waiting on positive news.