| gsgluskin |
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Gold User, Member, TeleChart
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| Registered User |
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| Unsure |
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| Monday, March 28, 2005 |
| Monday, August 13, 2007 12:06:07 PM |
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Hi Ch Thompson. Your question is confusing. Whether you enter a position long or short has no bearing on taxes. Taxes are paid on profits and losses are deductible with specific limitations. A chat with a tax professional might be a good idea.
Also, it almost seems like you want to be short and long the same stock simultaneously. Maybe do some more research about short sales before venturing much further. Call your broker too.
As far as offsetting profits with losses in the same stock, the IRS has very exacting requirements. Their are a number of IRS publications that address the Wash Sales Rule and there is even a tele-tax topic that you can listen to. The Wash Sales Rule was created to prevent folks from doing precisely what it appears you are considering: Make a profitable trade in a specific security, take a loss on the same security and then jump back in. Try that and you might be surprised to learn that you will pay taxes on the profitable leg of the trade, will sustain a loss on the losing leg and not be able to deduct a penny of the loss.
Sort of a double whammy. The goverment takes your money and then you willingly give a bunch more of it back to the markets. Doesn't seem like a very workable approach.
Good Luck,
Geoff
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Hi fpetry. Seems there's just about as many stop loss ideas as there are traders. Its really a personal issue and we all need to find what works best for ourselves. Eventually a system will develope based on your trading experiences. If you have access to intraday data and software that can perform backtests, you can test out various scenarios with which you are comfortable.
I do take issue with the advice from BigBlock when he or she writes that:
1. Stops are a sticky issue. They aren't at all - they are your friends!
And a good friend will help keep you out of trouble.
2. You MUST set stops based on volatility,the amount of risk you can "take" and your time horizon. For BigBlock maybe, for others it might just be the ability to read a chart or interpret a candle pattern.
3. The ever present paranoia of the dreaded "Market Maker". Phooey on that. Nasdaq MM's and the other exchange specialists are not evil doers.
In fact, you might have one living right next door.... LOL
Personally, when my stop price is hit for either a profit or a stop-loss I immediately take the trade. No ifs, ands or buts. I make too many trades to worry about 'what if' scenarios.
The only exception is an opening gap against the position. In this instance, I mark the low (or high if short) of the first 15 minute candle. Frequently, the price will improve so we don't liquidate at the worst price of the day. If the price is subsequently violated, bye-bye stock. Otherwise, we can be patient and watch for an exit price that is more favorable.
Just an idea, certainly not something you MUST do.
Happy Trading,
Geoff
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