I have been day trading the stock market for many years now. Watch this video and learn from my real time trading strategies. I use real time alerts and filter software. I can’t trade without them. Online day trading is a way for me to “make money at home” as a “home business”. I learned to day trade from videos, coaching, and other online courses. Live trading will help you learn more than paper trading. Psychology plays a major role in successful trading.
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I am starting out day trading stocks and want to minimize the taxes I will have to pay. Does anybody have good tips or tricks to doing this? I will not be holding them for over a year. Also any good programs or websites I might want to use. I use Scottrade currently but want something for charting.
If you have at least $25K on your brokerage account then you are classified as a pattern or full time trader and you can deduct trading commissions as regular business expense. That’s the most you can do. You will always have to pay taxes whether you sell ice cream cones or trade stocks.
Also you pay less taxes if you hold stocks long term. The more time that passes the less the percentage. I don’t remember the exact numbers right now but you could check on sec.gov . So traders basically pay more tax % than long term investors.
Is there any way to find out? If it were possible for the average guy to make a living this way, almost everyone would be doing it. You would have millions of people quitting their jobs and selling their houses, cashing in their 401(K)’s to do it.
I know there was a lot of day trading in the late 90s and most of them probably got wiped out when the bubble burst in 2000.
What about now though?
The State of Georgia pulled 100% of the brokerage account statements of its citizens to analyze that question. 90% of their daytraders lost 100% of their money, while 1% were profitable on a consistent basis.
The answer is yes you can make a good living doing it, but the average guy cannot do it. They may get lucky from time to time, but the average person is fighting the mathematics of the situation.
Let me describe an example. You decide to trade XYZ stock and it has a bid of 9.95 and an ask of 10.05. You buy at 10.05 giving .10 to the market maker. The next bid is 9.97 and 10.06. You still are not profitable. Then someone sells at 9.97 and the new bid is 9.94 and 10.03. You are now at a loss, and so forth. Overcoming just 10 cents is hard in a short time period. To make day trading profitable, because you are depending on small change, you have to borrow a lot. So instead of having 10.50 at risk you 105.00 at risk of which 10.50 is yours. So, over the next several minutes, the price rises because of a series of buys to 10.06 and 10.11. You try and sell out, but the bid is only for 100 shares. You sell the 100 shares and the price falls to 10.04 and 10.11. You made a 1 cent profit and you are still on the hook for the rest. The market maker, in the mean time, has made 1.05 in spread commissions plus any per unit commisions you may pay to your broker. You have made a penny, you are nearly $100 in debt and someone else got the dollar you were trying to make.
Now, lets imagine you picked well and it turns into a hot stock and six months later it is selling for 19.99 and 20.00. The maker is now only making a penny. Why?
That is the dirty trick. By the time you have made it to 20, you will probably have paid $20 in commisions, had a 10 increase in value and made another dollar or two in bonus money, you are up $12 on a ten dollar gain, if you were careful and did a very good job. The maker is really happy though because they are up $10 on their inventory, you gave them another $20.
However, lets get back to the why question, why is the spread only one cent.
When stocks go hot, they get overvalued and the market maker whose job is to hold inventory knows this and reduces inventory. Traders take up the inventory risk buy you carrying the inventory for the market. The risk is higher, but the market maker is carrying only a fraction of the inventory having sold it to day traders at a profit. So while you have $10 in profits held in an over valued stock, the maker actually is holding a lot of cash. They actually cashed out of the stock, down to a point they can still perform their function. They are basically now a notary, verifying who the buyers and sellers are. They are collecting a notary fee.
Now that the market has lost systematic support by the market maker, it depends upon you actually being online and willing to buy or sell as needed. This means supply will come available of either dollars or shares, only as people provide it. So the stock becomes very volatile. Whereas it may have only moved a penny per trade before, it may move six or seven cents per trade now,..maybe even ten cents. But that is less per dollar exposed than the market maker was pocketing in spreads, and the maker keeps the penny.
So the stock is at 19.99 and 20.00, one minute later it is at 20.06 and 20.07. You are actually exposed at 200.00 and so you pocket .70 on the trade. However, since you plow it back in again, it is sort of invisible.
Now for the nasty part. The stock climbs to 25 over the next few weeks and day traders are selling back and forth, mostly to each other. Someone gets nervous and leaves, taking their money to another stock, then someone else finds they cannot make money today, so they leave. When there was a market maker for the stock, that maker would absorb those sells, but now the maker is gone, unwilling to be anything other than a notary. These sells pressure the stock downward, putting other leveraged traders in a bind and it begins unwinding quickly, all the while the market maker is watching and collecting wider and wider notary spreads, but not stepping in to support the market. The market reaches 23.10 and 23.25. Now day traders have such a large spread to overcome they cannot do it, so they all try and leave. The price begins collapsing and some day traders try to buy into it figuring it will go up and they stabilize the price at $18.10 18.25. The price trades sidways for a few days and the spreads narrow, but the old day traders were burned and the ones who stepped in find themselves in a losing postion. Some exit taking their losses and some try to expand their position to gamble to make the money back. Again, the market maker is not providing much support because the volume has fell with all the day traders gone, so the inventory is about the same, but the maker will step in to stabilize the market at about a 7 cent spread. This is too much for the day traders that are left because the volume is now too low to make money quickly and another sell off occurs to fifteen. Now, the market maker is upping inventory as the stock becomes more valuable (a drop in price is an increase in future return as returns are inversely related to prices) and normalcy is beginning to occur or worse, short sellers are entering the market to force the stock to say, $5, and the maker needs inventory to support their shorting operations. These are hedge funds however, small traders need not apply and supply of shares to short will be unavailable to the little guy.
So, over that time period, an ordinary buy and hold investor is up $5. You, on the other hand, are down 80% because you borrowed money to day trade. Worse, you can only deduct $2000 in investment losses on your taxes, so you may owe taxes on prior period gains, but not be able to fully offset the losses, making you borrow money to pay the IRS, depending upon the tax timing.
I have been a professional investor for years. STAY AWAY!
If you have to ask these questions, you are not prepared to operate in these markets.
I strongly recommend buying "The Intelligent Investor," by Benjamin Graham. Last published in 1972, it is still in publication and will be in publication in2072. Be the guy who made the $5 the easy way, not the guy who fights for each penny.
and a video remote with the plug that goes into the xbox
Games – NHL Hitz 20-02, Mat Hoffmans ProBMX 2, NBA Live 2003, Greg Hastings’ Tournament Paintball, Spongebob Squarepants Battle for Bikini Bottom, NFL Blitz 2003, NFL Fever 2002, SSX3, Need For Speed Underground, Sega GT 2002 [and on the same disc] Jet Set Radio Future, Test Drive, The Lord of The Rings The Return of The King, The Elder Scrolls 3 Morrowind, Tom Clancy’s Rainbow Six 3, Call of Duty Finest Hour, True Crime Streets of LA, and College Hoops 2K6 [the xbox comes with all the cords aswell]
Your best bet is to take that list and go to EB Games or wherever else you trade in your games to get a 100% for sure answer on how much you’ll get. Oh and a tip the longer you wait to trade in the less you will get for it
What are the best tools and strategies that work for you??? I’ve been trading with paper money for about a month now and have had some success as well as some losses. I wanted to get some opinions from people who are successful at it. Thanks…
there are many ways to trade markets successfully. i trade stock index futures due to high liquidity and small spreads although they are not the easiest markets to predict. the idea is to exit a trade quickly if it turns out that the market moves differently than you anticipated. this should not happen a lot. on a profitable trade let it run until the direction starts to change. as a result your winning trades should make you much more than your losing trades cost you.
i don’t like day trading stocks or options due to inferior opportunities.
i use relatively few indicators as they are always late in their signals. i try to anticipate markets but i do use some oversold/undersold indicators to help me determine what may happen next. i feel a good trader could make money consistently with no indicators at all.
you need to be a consistent winner paper trading before you risk real money. the better you understand the markets that you trade the less you will need indicators. you will need to learn how to pick your entry points as well as your exits points and be right most of the time. patterns repeat themselves and you need to recognize them early. i like to enter a trade when i feel the odds favor a move. you must be very disciplined in your trades.
there is more i could say but this will get you started. usually the successful traders have studied the markets for years before they are able to be consistantly profitable.
I have a few pistols that are in excellent condition and would like to maybe trade them for guns at gun shows or gun stores. How does gun trading work? How does a typical gun trading deal go down? Thanks!
when you trade your gun for a new one from a dealer, its like you giving him your gun for free. You will usually loose in a trade. Best to sell your guns first to a private individual, then take the cash and buy what you want…it takes a little more time and effort, but it is usually the only way to get a fair price for what you are selling…
So I think swing trading may be the trading strategy I want to go with when I start investing in the stock market. What are some good books I can read about swing trading to better my knowledge?
How to Make Money in Stocks by William J. O’Neil
Investment strategy, which combines technical and fundamental analysis. 248 pgs. Full description by the publisher of Daily Graphs of his famous CANSLIM stock
FROM THE PREFACE: America is the world’s leader in successful new, entrepreneurial companies. Many are in the computers, communications, and technology sectors. Others are in the medical, retail, and leisure and entertainment industries. As an investor, you should develop the skills and acquire the knowledge necessary to recognize and invest in the fast-growing, innovative companies that comprise our New America.
But how do you pick which stocks to buy and how can you significantly minimize the risk you take in buying stocks? And, most importantly when do you sell your stocks? This book will answer all of those questions for you.
How to Make Money in Stocks gives you a simple, easy-to-use system called C-A-N S-L-I-M. The method is based on an exhaustive, ongoing analysis of every big winning stock each year since 1953. Each letter in C-A-N S-L-I-M stands for one of the seven key factors that all of these past super winners had in common. So, this is not some theoretical or academic method. This is based on how the stock market actually works.
How well does the C-A-N S-L-I-M method work? It is the best method devised and available for individual investors, whether new or experienced. More than 200,000 people have attended our free investment seminars and all day paid workshops where the method is explained in detail. At each session, many people tell us how they made 50% or 100% in the previous year using the C-A-N S-L-I-M system.
David Ryan was the first to use the method in the US Investing Championship and won three years in a row. He invested his own money in an actual account that was monitored by CPAs. He averaged over 100% per year and is now the portfolio manager of the New USA Mutual Fund.
Cid Moses entered the contest in 1991 using the method and came in first with a record-setting 379%. Lee Freestone, one of our associates came in second that year with a 279% increase using C-A-N S-L-I-M. In 1994 Lee won it with a 234% increase. The Dow Jones Industrials that year increased 13.7%. There are numerous other examples, such as Dan Running of the University of Baltimore, who won the USA Today championship with a 115% increase in 1994; and Jay Plisco of Cold Spring Harbor, New York who won the 1995 Fidelity Investment Challenge by using C-A-N S-L-I-M for an impressive 135% gain.
You may want to read this book a couple of times to get it all down, but anyone can learn to invest more successfully if he or she is willing to work at it. And why shouldn’t you learn to capitalize on and benefit financially from the most successful entrepreneurial companies in America?
How to Make Money in Stocks took me many years to write, and I’ve now been in the battlefield of the financial marketplace for 40 years. So this book can and should help you avoid most of the pitfalls all investors face in this treacherous arena.
In the long run, the U.S. market always goes up because businesses create new products, new services, and new technological inventions. It is the companies with the best new products and services that serve the most people that are always the top stock market winners.
In the last 100 years, the stock market has had 25 bear market declines. These were natural corrections of the previous bull market advances. Every time the market recovered and ultimately soared back into new high ground. So don’t get sidetracked by the vast number of gloom and doomers. They rarely have made money for anyone. Besides, I don’t ever remember meeting a successful pessimist.
In the early 1960’s, William O’Neil & Co. created the first daily computer database on the stockmarket in the United States. In 1970, we created Datagraphs, institutional investors’ service. Today, more than 600 top institutional investors take a wide variety of our research services. We also publish Daily Graphs, a daily charting service provided weekly and designed for individual investors.
In 1983, I created the basic format for a new national daily business and financial newspaper, Investor’s Business Daily. Investor’s Business Daily made major advances in the quality and availability of vital, relevant information for all public investors and people and business. Sold nationally in every city the newspaper is the fastest-growing newspaper in the United States. It has steadily taken share of market away from the century-old Wall Street Journal.
For those still uncertain if C-A-N S-L-I-M really works, William O’Neal & Co. was started with profits made in Syntex stock in 1963 and Investor’s Business Daily was built and promoted with profits made in Pic N Save Price Co., and Amgen.
I want to buy stocks…I am thinking of going with e*trade.
Has anyone on Y!A used these guys? If so, what are your opinions of them? Are they super expensive? Any suggestions?
Thanks!
E-Trade has been around for many years and they enjoy a well earned reputation.
HOWEVER, before you open a brokerage account, you should educate yourself on what you doing, why you’re doing and where you are going to do it.
Don’t expect E-Trade or any other broker/dealer take the time to educate you in the market and the various processes.
I have some capital gain to report. The source is multiple very small small trading transaction of FX trading. I have both Monthly/2007 annual summary to total capital gain & individual transaction(100s in number).
I am currently using Turbotax Premium they donot have any option for FX trading.
Please let me know how can I report this in my tax return for 2007.
You need to complete Form 6781 for your FX transactions. Copy the information from your 1099-B and attach a schedule of your transactions.
Good luck, and happy filing!
is very Risky? What are the risk factors for a beginer?
Please advice!!!!!!!!!!!!!!!!!!!!!!
Rich got it right. Day Trading is risky and very few people are good at it. None of the worlds top investors got there by day trading.
Day trading involves technical analysis only, and the trader needs to make quick decisions on what to do.
You are better off investing for longer periods of time.
Christian Nago
CEO & Chief Investment Officer
www.intrepidtradings.com