Originally Posted by
Buck Rogers
Not understanding the logic here....maybe you guys can help me out.?
Let's start at the beginning....there are 2 choices. If I trade stocks, I can make money or I can lose money.
If i think I will lose money.... the prudent person says "I would be foolish to trade in any account(tax advantaged or not) therefore I won't invest".
The other option is you think you will make money. Therefore, how much can I make after taxes.? Day trading will be short term capital gains. So, 35% federal(marginal) combined with 13% state(Cali) and 4% Obamacare tax....viola you get to keep less than 50% of your expected gains......unless you have it in a tax advantaged account
Not advising to do it.....but I can easily see there are reasons where it MIGHT be appropriate
Kinda like market orders....Lots of volume, 1 cent spread between bid/ask?....let her rip. Had that 1 cent price on a limit order cost me when trying to get a fill over a penny improvement. Then I chased it. There are certainly generalization that work, there are also exception to the rule.
Most advisors say to get risk averse as you near retirement....I contend that might be where you push it up(on the risk spectrum) if you are investing money that you don't logically envision ever needing.
Not trying to pick nits....only offering alternate "logic"
The hard numbers on day traders is that 95% lose money. Investing and day trading are two very different skills. Investing in solid companies or index funds have the benefit of the tailwind of the persistent long term bias of the market to rise approximately 8% per year. Day trading has a dismal track record for traders and therefore I would never recommend it for anything but "extra/fun" money.
Market orders are fine, as long as volatility is not too off the charts and the stock you are trading is stable. During the GME run up a few weeks ago there were times where the volatility was so high and share availability so low that spreads were out of control. As long as a trader can recognize the conditions they are trading in have at it. Most of the advice you will see posted here is aimed at beginning traders because we don't know the experience level of the one asking the questions.
The tax issue you allude to is the reason I use futures and options on futures. I benefit from the 1256 tax rules and the effective rate works out to somewhere between twenty and thirty percent. (60% long term capital gains rate and 40% regular income rates even if you never hold for more than a few hours) Also with futures you don't have to record every trade. I get a 1099 for the year and I file, simple.
The presumption is that one will need their retirement account for that purpose. If not, if for you it is extra money and doesn't affect your lifestyle later then disregard the advice and trade away. It is impossible for us to know everyone's situation so I default to the traditional and assume anyone who is sophisticated enough to day trade profitably is also sophisticated enough to know what type of account to use to do it.