PRINCIPLES OF TRADING: RECORD KEEPING AND TAXATION

It is imperative for every trader to maintain a precise, organized, and latest trading-related records. Hence, traders should keep both hard and digital copy of important documents such as brokerage statements (from the broker), resources (economic calendar, holidays, rollover dates, etc.) trading journal, and trading plan (data, specification, previous and current versions, etc.).

Being orderly helps a trader to become more efficient business owner and trader. It also pays to come up with a systemized manner of conducting a research and development for create a well-laid trading plan. Forget not to make the office or trading desk clutter-free at all times.

When it comes to taxes, the Internal Revenue Service has a set of regulations relative to trading, which is the same laws as investors. For active traders, they can use the mark-to-market method for taxation, enabling them to subtract some trading costs including education and platform charges.

Not all traders can use the MTM status and not everyone desires to elect this. Once the status is acquired, all positions must be considered closed at the end of the year, regardless if the positions have been really facilitated.

Those who trade stocks may benefit from the MTM election. However, commodities and futures traders may better off without the status and opt for other tax treatments. If you consider inverting this election, a trader may experience difficulty along the process. Consult with a certified public accountant, lawyer, or tax specialist to know how to deal with such reversions.

Tax laws change every now and then; not to mention it is complex. Still, it is vital to hire a professional to handle tax-related matter and focus on arrange the necessary paperworks and records. That way taxation becomes less costly and stressful.

That ends our tutorial on the principles of trading. Keep reading our articles on Forexpedia to gain or refresh your trading knowledge and keep abreast of the latest market news.