If you do make a profit??

beachyboy

Finally about to take the plunge and start trading, but have a couple of questions . If I do start making a profit how much capital gains tax and does this rate change if you start doing short term trading. Buying in and out of a stock about twice a week.
Also how do you declare and pay the capital gains tax.
Thanks!

arrowloopboy

Short term trading ,spread betting is the way to go,you pay 0% ,unless its your sole source of income,forget traditional style brokers if your only interested in short term 0-6mts positions.
Do you have a strategy ,with a positive expectancy ?

beachyboy

My strategy to set up an account with TD ameritrade – commission free trading for 60 days. Find a good stock that seems to be going up , buy it with an instruction to sell if it gets to a certain value coupled with a stop loss. Then check in on my account once or twice a week, sometimes adjusting the sell values until I eventually get cashed out, then rinse and repeat. So I will have to pay capital gains, I’m just wondering at what rate, and whats the handiest way to do it?

arrowloopboy

beachyboy wrote: »

My strategy to set up an account with TD ameritrade – commission free trading for 60 days. Find a good stock that seems to be going up , buy it with an instruction to sell if it gets to a certain value coupled with a stop loss. Then check in on my account once or twice a week, sometimes adjusting the sell values until I eventually get cashed out, then rinse and repeat. So I will have to pay capital gains, I’m just wondering at what rate, and whats the handiest way to do it?

Are you going to wager a certain % of your account on each trade ? or just ad hoc amounts ? ,are you going to give each position a certain % stop loss or some other technical calculation as a stop loss ?
Whats your bankroll ,if you don't mind me asking ?

beachyboy

arrowloopboy wrote: »

Are you going to wager a certain % of your account on each trade ? or just ad hoc amounts ? ,are you going to give each position a certain % stop loss or some other technical calculation as a stop loss ?
Whats your bankroll ,if you don't mind me asking ?

Plan is to place between 2 - 5k per trade, less on the more volatile stocks more if purchasing etfs / bluechips. For this year I have ~ 40k to trade with which I plan to phase in gradually, have the first round of investments protected buy a stop loss which has been increase to my intial purchase price prior to the next round. Manixum I am prepared to loose if all my stops are hit is 10% of my overall fund. So I will start with less volatile stocks and have a max stop loss of 10%. Then depending on results I will review my strategy.

arrowloopboy

beachyboy wrote: »

Plan is to place between 2 - 5k per trade, less on the more volatile stocks more if purchasing etfs / bluechips. For this year I have ~ 40k to trade with which I plan to phase in gradually, have the first round of investments protected buy a stop loss which has been increase to my intial purchase price prior to the next round. Manixum I am prepared to loose if all my stops are hit is 10% of my overall fund. So I will start with less volatile stocks and have a max stop loss of 10%. Then depending on results I will review my strategy.

I'm by no means an expert ,had 0 education,but I am a consistently succussfull trader,this is just my tuppence worth ,take it with a pinch of salt.My ROI is above 50% since I started my fund 3 yrs ago.

You've 40k, 2-5k per trade seems too high its between 5 and 12% of your account.With a 2% risk per trade you'll get to stay in the game forever.
On a 5k trade with a 10% s/l that gives you a risk of E500.00 ,why are you tying up the other 4.5k of your bankroll (Divident ?) seems madness.

Alternatively,

Pick you stock,
ACME Inc share price E10.00 per share
Risk 2% of your acc (40k) = E800.00
10% stop loss of your E10.00 share = E1.00 0r stop loss set at E9.00
Divide E800.00 into 100 points i.e E8.00 per point.

If you stock declines 10% you lose E800.00 ,but if it continues on its merry way upwards you gain E8.00 for every 1 penny/ point it goes up.
Total equity tied up = 2% of you bankroll or E800.00

If your stock rises 10% you don't make 10% like with regular share buying,you make 100% ROI,you could also use a trailing stop which means you very rarely lose your full stake unless the share price plummets 10% just after your entry.

That way you only tie up a fraction of your bankroll per trade.

That's just the way I operate,something for you to think about.

Oh,and theres no cgt ,your only extra cost is the spreads .

AOH77A

Hi Arrowloopboy, If you d'ont mind me asking appreciate if you could let us know how you pick shares to invest in ? Do you have a fixed strategy ?

arrowloopboy

AOH77A wrote: »

Hi Arrowloopboy, If you d'ont mind me asking appreciate if you could let us know how you pick shares to invest in ? Do you have a fixed strategy ?

Sorry AOH,i'm not going to delve into my exact strategy ,but its nothing special,i trade ftse100 and ftse 250 stocks , I subscribe to the investors chronicle,the motley fool and a few bulletin boards,i look at charts ,but I'm not a technical trader,i follow news feeds etc on companys in the above indexes.Common sense mostly,i don't trade penny shares.
The stratagey I designed is mechanical as soon as I enter a trade ,that cuts out a lot of rash decisions,a little research goes a long way.

Arrow

AOH77A

OK Thxs

beachyboy

Interesting - to be honest I know very little about spread betting so I'm open to correction here. But my understanding was that if you are betting one way there is someone else betting the other way and the spread bet company is making its fee by laying one bet off against the other. Therefor the average punter is is a disadvantage as the spread bet company is in buisness, funded by the looses of the people placing the bets. So the die is loaded against you, however in a bull market with stocks you the die is loaded in your favour. Nice ROI

arrowloopboy

beachyboy wrote: »

Interesting - to be honest I know very little about spread betting so I'm open to correction here. But my understanding was that if you are betting one way there is someone else betting the other way and the spread bet company is making its fee by laying one bet off against the other. Therefor the average punter is is a disadvantage as the spread bet company is in buisness, funded by the looses of the people placing the bets. So the die is loaded against you, however in a bull market with stocks you the die is loaded in your favour. Nice ROI

No,the s/b company makes their profit from the spread ,weather you win or lose,they don't care,its a myth that s/b companys want you to lose,thats basically bullsh1t.
Example,

My live FTSE 100 annual trade.

I opened the trade at 6410.00 at say £10.00 a point
The spread was 18 points i.e £180.00 (that's the cost to keep that trade open until Jan 2nd 2015 or anytime I chose to close it before that date.
My only costs for this trade is said £180.00.
My target is 7200.00/7400.00 if said target is hit at say 7300.00 I make
£8900.00 - spread of £180.00 = £ 8720.00 , and I don't have to pay a penny CGT:D simples.I don't even know the rate of CGT ,it doesn't apply to me.

Spread betting has a bad name because a lot of people use it as a gambling mechanicism for FX and the like.

It can also be used very effectively as a hedge stratagey against your regular conventional share positions.

Robbie Burns (the naked trader)wrote a book on spread betting,its fairly simple stuff,but explains the ins and outs in a simple relaxed manner,have a read,before you decide on your trading route.

Good luck whatever way you choose to go.

Arrow.

JohnnieA

So what is the best place to open a spread betting account in Ireland arrowloopboy?

Does CGT-free apply to Ireland? Thought it's in UK only. Also do you know what is meant by "sole source of income"? If my spread betting income becomes large enough (say hypothetically 10-20 times larger than my regular income), can revenue claim that it's my "sole source of income"?

arrowloopboy

JohnnieA wrote: »

So what is the best place to open a spread betting account in Ireland arrowloopboy?

Does CGT-free apply to Ireland? Thought it's in UK only. Also do you know what is meant by "sole source of income"? If my spread betting income becomes large enough (say hypothetically 10-20 times larger than my regular income), can revenue claim that it's my "sole source of income"?

Don't bodder with an Irish firm,go with the biggest/longest established/best firm, IG Index ,they now have an office in Dublin.

Yes the CGT free applys here too its classed as gambling :D:D.

I checked with my accountant,your sole source of income is the income you make from your everyday job,its irrelevant if your trading activity makes you more than that.

JohnnieA

Thanks. I've been trading for the past 7 years and although I do well, the CGT is killing me for short term trades. I'll consider giving spreadbetting a shot.

For anyone else reading this: Just remember that it works both ways. Although you don't pay tax, at the same time you cannot offset any losses you make here.
Make sure you do understand how it works. arrowloopboy gave some examples. Main advantage here is you don't pay CGT. Small advantage: you're funds aren't tied up as much and it's easier to gain from SP decrease than short-selling. Small disadvatage: no dividends, which you could get from actual trading. Do your own research.

arrowloopboy

JohnnieA wrote: »

Thanks. I've been trading for the past 7 years and although I do well, the CGT is killing me for short term trades. I'll consider giving spreadbetting a shot.

For anyone else reading this: Just remember that it works both ways. Although you don't pay tax, at the same time you cannot offset any losses you make here.
Make sure you do understand how it works. arrowloopboy gave some examples. Main advantage here is you don't pay CGT. Small advantage: you're funds aren't tied up as much and it's easier to gain from SP decrease than short-selling. Small disadvatage: no dividends, which you could get from actual trading. Do your own research.

spread betting is ideal for short term trading 3/9mts.
The leverage is a huge advantage if you have a decent stratagey.
YOU do get dividends ,on the ex date not the payment date,so theres no disadvantage there.On some of my trades the dividend was equivalent to 25% of my initial stake .

Research is the key here,you'll make up yer own minds if its for you or not.

Arrow.