(tda) Longs vs Traders
In response to Suzanne N, who was moralizes and
preaching on the fiscal benefits of being "long"
as opposed to "trading"
Me thinks Suzanne is a bit naive.
Why do you think day traders like volatility, look at
intraday trading patterns, post moment by moment stock prices,
stare at level two, scream it has hit its bottom, and
its going to bounce, PUMP, then DUMP , and then PUMP again?
A daytrader is in and out multiple
times even in the same day and would rather
see the stock trade within a predictable volatile range
rather than go up slow and steady.
Here is a very successful (one of the few)
trading strategy for 100,000 share buy and sells
100,000 @ .04 (-$4,000)
sold @ .07 (+ $7,000) Profit $2,000
buy @ .05 (- $5,000)
sold @ .09 (+ $9,000) Profit $4,000
buy @ .07 (- $7,000)
sold @ .16 (+ $16,000) Profit $9,000
buy @ .11 (- $11,000)
sold @ .18 (+ $18,000) Profit $7,000
buy @ .16 (- $16,000)
sold @ .24 (+ $24,000) Profit $8,000
buy @ .22 (- $22,000)
sold @ .38 (+ $38,000) Profit $16,000
buy @ .29 (- $29,000)
sold @ .43 (+ $43,000) Profit $14,000
buy @ .38 (- $38,000)
sold @ .56 (+ $56,000) Profit $18,000
buy @ .50 (- $50,000)
sold @ .76 (+ $76,000) Profit $26,000
buy @ .62 (- $62,000)
sold @ .85 (+ $85,000) Profit $23,000
buy @ .72 (- $72,000)
sold @ .90 (+ $90,000) Profit $18,000
buy @ .67 (- $67,000)
sold @ .76 (+ $76,000) Profit $9,000
buy @ .56 (- $56,000)
sold @ .62 (+ $62,000) Profit $6,000
buy @ .35 (- $35,000)
Now hold these "free" shares long for three years
and sell at $10.00
Let's do the math:
from day trading = $ 160,000 - marginal 34% tax bracket = $105,600
from holding long = $1,000,000 - 20% long term capital gains = $800,000
now factor in time $105,600 for 10 days = $10,560 per day
.....................$800,000 for 1,095 days = $ 731 per day
figure that 105,600 is going into other investments
The annualized % gains far exceed any longs
Plus the day trader can go long on "free shares"
However, few day traders are this successful.
Most screw up and sell for a loss when they mistake
the direction the stock is heading.
Some even go shoot their family and fellow traders
Hope this puts this investment style in perspective.
Moralizing won't change these strategies for those that
are successful make a lot more money than any patient long.
Time and liquidity works in their favor.
Gradating capital gains (cg) taxes rectifies this problem more effectively.
Here are my suggested cg brackets for different equity holding lengths.
Cg held over two yrs = 0.00 %
Cg held over one yr = 15.0%
Cg held over 6 months= 25.0%
Cg held over 1 month = 40.0%
Cg held over 1 week = 55.0%
Cg held over 1 day = 65.0%
This encourages people to research what they buy discouraging piling on and panic.
Allows companies to have greater stability with their finances.
Anyway, that's my opinion and bias
z
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