The idea of becoming a player in the stock market can be scary and exciting at the same time. Unfortunately, people who are interested in trading or investing are often put off by the risk and uncertainty of the process before they can really experience the potential rewards.
Day trading especially gets a bad rep when the truth is, there are a lot of advantages that make it not just a profitable hobby or profession, but a smart and satisfying one too. Here are some of the biggest perks that make being a day trader worthwhile!
1) There are a lot of resources to help you get started.
Becoming a day trader is a very simple process. As long as you have a computer and internet access, the only other thing you need to do is start trading. To be a successful day trader, however, you will need to educate yourself on reading the stock market and trading strategies, among other things.
The good news is you don’t need to pay for another college degree or intensive program if you don’t want to. There is plenty of free information online—blogs, videos, eBooks, etc.— to help you learn the ins and outs of day trading. You can also easily access paid programs if you want to do more in-depth research, as well as trading software to help facilitate your activities (which can often be demoed for free).
2) You don’t have to worry about overnight risks.
When you hold stocks for long-term investing or swing trading, there’s always a chance something in the market will change overnight and your profits will plummet. Since, as a day trader, you’ll be opening and closing your positions all within the same day, you don’t have to worry about these overnight risks. Gaps or crises that happen after the market has closed are not a factor in your trading success. You can go to sleep feeling secure in your profits, since you are 100% cash at the end of each day.
3) Earnings compound more quickly.
The biggest appeal of day trading for most people is the potential to make a lot of money in a short time. While this does mean trading carries a higher risk than long-term investing, the potential for reward is much higher. If you do your research and take the time to strategize, you can significantly reduce your chances for loss.
Profits from day trading also add up more quickly because your earnings from one day can be put into larger positions the next day, which have the potential to make you even more money. Therefore, if you dedicate yourself to it, your day trading profits can increase exponentially.
4) If you qualify or incorporate, there are tax advantages to day trading.
As we said earlier, all you have to do to be a day trader is start trading. However, if you continue to trade passively, your earnings are subject to normal income taxes and deduction limits. If you’re an active day trader, qualifying for trader status or incorporating your operation will yield considerable tax benefits.
Qualified traders and trading businesses (usually LLCs or corporations) are able to deduct trading expenses—software, education, margin interest, office supplies, business space, etc.—from their taxes each year. You also have the potential to make the Market-to-Market election, which can eliminate the $3000 net capital loss limitation. Instead, if you qualify for the Market-to-Market election, you can deduct all of your losses against your ordinary income, thus writing off the loss in full. Qualifying for IRS trader status can be difficult, so trading as a business often ends up being the easiest option.
5) You get to be your own boss.
The other aspect of day trading that attracts most people’s interest after the profit potential? The freedom of working for yourself. As a full-time day trader, you control everything about your enterprise. You set your own schedule, choose your office location, design your own trading plan, and, ultimately, determine your own success.
The harder you work, the more successful you have the potential to be. The prospect of all of these possibilities can be very freeing and exciting. As long as you’re dedicated, self-disciplined, and willing to put in the time and effort, there’s no reason you can’t reap the financial and lifestyle benefits of day trading.
At Trader’s Accounting, we want you to be able to enjoy the advantages of day trading without having to worry if you’re losing money when tax time comes around. That’s why we offer professional tax preparation services for active day traders. Our specialized services will help you maximize efficiency, reduce liability, and find and pursue any opportunity to build your wealth.
Reach out online or give us a call at 800-938-9513 today to start optimizing your trading dollars!