As a result of an overwhelming request of questions about Day Trader Status I have decided to publish this article to look at these problems.
Whether you know about it or not, you don't want to accidentally learn about Day Trader Status because of a notice from your brokerage firm saying that you are now tagged as a Day Trader!
What exactly is a Day Trader?
A Day Trader is an individual who does four intra-day trades in five consecutive trading days. Let me address some terms here to help you understand this much better:
Intra-day trade: A trade that's opened and closed in the same trading day (round trip).
Five Consecutive Trading Days: These are typically calendar days that the market is open, all consecutively. For example: If the market was open on Monday through Friday, that would be five consecutive days.
With regards to stock performance and choosing a great investment, many have looked for that 'perfect system' to screen out and recognize the big opportunities. But what's the simplest way for the little investor to tackle the changeable creature that is the Stock Market?
Then we would have Tuesday through Monday for the next five days (unless Monday was a holiday, in which case it would then be Tuesday through Tuesday.
Next, we'd have Wednesday through Tuesday, etc. The key is five trading days consecutively.
When people consider different types of investments they usually think of one or the other, but don't put them up against one another. Foreign exchange trading, also known as forex trading.
How to Avoid It
One of my favorite students, Debi D, taught me to use a calendar to document my intra-day trades. By placing an "X" on the day you do intra-day trades, (2 X's if you do two, 3 X's if you do 3 in that day) you'll be able to steer clear of accidentally getting to four by looking at your calendar.
For some who have asked themselves "how do I buy a stock", the realization could be that the process will be quite challenging but for those with strong hearts and courage, buying your first stock is easier and quicker than it's been before.
Make sure you mark the specific days the market is closed on your own calendar. Your brokerage firm will likely impose the NASD requirements of keeping no less than $25000 inside your trading account - and you have 5 days to abide by that rule.
Tax Consequences with the IRS
Traders that buy and sell securities frequently can report their purchases and sales resulting in capital gain and loss, and their deductible expenses.
If you are new to trading and are curious about business mergers, the importance of a public shell, or possibly putting your money into a company like capital pacific, it's best to contact a broker to help you make the best decisions with your money.
Happy Trading!
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