New Margin Rules Could Catch The Unwary Investors might get swept up in rules designed for day traders.(MAKING MONEY IN MUTUALS)(INVESTMENT TRENDS)

Byline: Ken Hoover

Many brokerages on Friday increased the margin day traders can use. But the new rules are perplexing the day-trading crowd and ordinary investors.

The new rules give day traders more money to play with. But small investors who don't consider themselves day traders could get swept up in the new rules without realizing it. They might find their margin accounts unexpectedly restricted to cash.

This is how the new rules work:

You are considered a "pattern day trader" if you make four day trades within a five-day period and those trades account for at least 6% of your trading volume during that period. A day trade involves buying and selling the same stock in the same day.

If your broker's computers tag you as a day trader, you must have at least $25,000 in your margin account. Ordinarily, the law says margin accounts can be opened with as little as $2,000. If you don't have enough money, your broker could demand you put up more cash within five business days or your account will be restricted to cash. You won't be able to use margin for 90 days.

As the rules took effect, there was considerable confusion, even at the brokerages that are supposed to enforce them.