You need $25K to day trade. Saying its to prevent losses. And since most people don't have $25K saved up, they can't day trade
It's not to protect idiot day traders, it's to protect their victims when they can't make their margin calls.
I don’t think that is it. The margin is very low for stocks. It’s 3x for large cap stocks. Very illiquid stocks you don’t have margin generally. Many $1 stocks or so also don’t have 3x leverage.
And if you don’t cover your negative balance they will basically send the collection agency after you. Since they have all your data.
I worded that poorly. I meant it protects the victims of the idiot traders. Sure the collection agency will go after the idiot traders but
they can't recover what doesn't exist. Meanwhile the victims are left holding the bag. The barrier to entry is to reduce the number of
day traders that can't cover their losses.