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Originally Posted by zagi
Meta, is it worth trading on a daily basis, do you take taxes into account, aren't they 50% on short term capital gains ( day trading ) ?
Also how much money are we really talking about here, because it seems that with the # of trades you're doing on a daily basis you lose quite a bit of your profit to comission and that probably means that there isn't much profit to begin with
And finally, doesn't it make more sense to use 1 broker say Etrade for its level2 app and say ameritrade for OTC stocks?
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Yes, I pay on average $120 per day in commisions, but as a trader, since commisions are your only expense, you have to deal with it. It is part of doing business on wallstreet, which is why you have to keep them at a minumum and you can do that with Etrade or Ameritrade. Now, I make 10 trades per day, which is in actuality 5 stock transactions, because in each transactions, there are 2 trades that take place, 1 for when you purchase the stock, and 1 for when you sell it, so in actuality, your paying $20 per each transaction.
Out of those 5 transactions, I have a "winning percentage" of 80%. What this means is 4 of those stocks I will make money on after selling it, and 1 of those stocks will be a losing trade from the moment I buy the stock (I will get stopped out at 2%).
If you have a 80% winning percentage in the market, you will make ALOT of money, but believe me, when I started out, I had a 70% winning percentage which is incredible, but I lost ALOT of money, the majority of my starting capital in fact, simply because I would makesomething like 40% in 1 week, and then lose 50% on a single trade! That is why I talk so much about the 2% rule because your entire investment could be wiped out in 1 single trade, and believe me, that can happen very easily in this market.
If you can pick a winning trade 8 out of 10 times, or even 6 out of 10 times, and you keep EVERY SINGLE ONE of your losses to 2% (no excuses, if you don't follow the 2% rule, you will lose money), you will make good money in the market.
As far as your starting capital, I won't mention how much I trade with, it's a good amount, but I would recomend that you start out with at least $10,000, although since I trade low priced stocks (because they are the most volitaile) you can start out with as little as $5000 and still be able to grow that, although the more starting capital, the better. I use margin, but in order to use margin and you are classified as a day trader(you do 4+ trades per day), SEC rules mandate that you have a minumum of $25,000 in your account.
Here is the most important part about starting capital: The higher the reward, the higher the risk. My trading is high risk. DO NOT go and reach into your kids college fund or your rainy day/emergency money to start trading in the market. Use only the money you can afford to lose. I really hope everyone listens to this, because you can lose your money. Always think about the worst case scenario.
For taxes, you can look at it this way. In order to not pay the capital gains tax, you have to hold your stock for 1+ year. Buy and hold is a fools game. So you will have to pay the tax if you do short term trading and there is no way around it.
You can deduct $3000 per year towards your capital gains if you have had losses in the market, but that is about it. Since the more you make in the market, the more you pay taxes, I will happily pay the most amount of money in taxes that I can, because that means I had a good year
