Appreciate the spirit in which you started this thread but, unless I've misunderstood you, the above logic is quite flawed. % tax on profits is not comparable to % edge loss in bid/ask. In nearly all practical cases, the bid/ask edge loss will dwarf any tax considerations.
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- Thread starter ballsofgold
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Appreciate the spirit in which you started this thread but, unless I've misunderstood you, the above logic is quite flawed. % tax on profits is not comparable to % edge loss in bid/ask. In nearly all practical cases, the bid/ask edge loss will dwarf any tax considerations.
Appreciate the spirit in which you started this thread but, unless I've misunderstood you, the above logic is quite flawed. % tax on profits is not comparable to % edge loss in bid/ask. In nearly all practical cases, the bid/ask edge loss will dwarf any tax considerations.
i disagree in the case of cfd's, you have to look at it statistically over time.
using wti as an example
i said the future was a 2 tick bid/ask while the cfd was 7 ticks.
so if you buy 1 lot of futures, you can calculate your bid/ask loss to be 1000 * .02 = 20$
if buy the equivalent exposure in cfd:
1000 * .07 = 70$
so on 1 lot, you lose 50$ of edge on every trade which is also commission free on cfd's but NOT commissions free on futures
now if you catch 50 ticks on the trade you make 500 usd.....you pay 100 usd in taxes if you are in the US, but imagine you were in a 40% tax jurisdiction....plus commission in futures....
if you caught 100 ticks in oil, you make 1000 usd.....you pay 200 usd if you live in the US, but 400 if you live in the EU in futures plus commission..
with the cfd, you keep it all.....clearly there is advantage unless i am missing something?
where you may be correct is that if the cfd firm knows you are a hammer, and you start trading size, they will widen the bid/ask on the platform....but then you just have to calculate when the tax free pay off is no longer worth it......
for the case of a small trader, which is what the person asked, this is a non-issue
for the case of a small trader, which is what the person asked, this is a non-issue
STEALTH VENDOR ALERT--- Extreme Arrogance plus book knowledge and fake altruism = money lost. Be cautious
i disagree in the case of cfd's, you have to look at it statistically over time.
using wti as an example
i said the future was a 2 tick bid/ask while the cfd was 7 ticks.
so if you buy 1 lot of futures, you can calculate your bid/ask loss to be 1000 * .02 = 20$
if buy the equivalent exposure in cfd:
1000 * .07 = 70$
so on 1 lot, you lose 50$ of edge on every trade which is also commission free on cfd's but NOT commissions free on futures
now if you catch 50 ticks on the trade you make 500 usd.....you pay 100 usd in taxes if you are in the US, but imagine you were in a 40% tax jurisdiction....plus commission in futures....
if you caught 100 ticks in oil, you make 1000 usd.....you pay 200 usd if you live in the US, but 400 if you live in the EU in futures plus commission..
with the cfd, you keep it all.....clearly there is advantage unless i am missing something?
You were responding to a question about daytrading. You pay taxes on net profits, so your example assumes average trades (winners + losers) = 25x the bid/ask spread. If there are products out there where this type of daytrading performance is possible, please tell me. I would love to be wrong here.
Also, you say:
"if you are in the US you have to pay, which comes out to about 20% pro-rata, on 1256 contracts based on a 60/40 long/short term tax treatment"
followed by:
"most spreads on cfd's are not 20% bid/ask, so it is worth it"
That's a fallacy.
Not trying to give you a hard time, but the amount of taxes paid on profits should not be a concern for "aspiring traders". One must be profitable first and that's much harder to do when paying 3.5x the edge loss in bid/ask.
STEALTH VENDOR ALERT--- Extreme Arrogance plus book knowledge and fake altruism = money lost. Be cautious
So not a real Hedge Fund Guru ?
Can't you just PM him and verify his credentials surf ?
You were responding to a question about daytrading. You pay taxes on net profits, so your example assumes average trades (winners + losers) = 25x the bid/ask spread. If there are products out there where this type of daytrading performance is possible, please tell me. I would love to be wrong here.
Also, you say:
"if you are in the US you have to pay, which comes out to about 20% pro-rata, on 1256 contracts based on a 60/40 long/short term tax treatment"
followed by:
"most spreads on cfd's are not 20% bid/ask, so it is worth it"
That's a fallacy.
Not trying to give you a hard time, but the amount of taxes paid on profits should not be a concern for "aspiring traders". One must be profitable first and that's much harder to do when paying 3.5x the edge loss in bid/ask.
Well I average about 30 times bid/ask spread
In backtest lolz
You were responding to a question about daytrading. You pay taxes on net profits, so your example assumes average trades (winners + losers) = 25x the bid/ask spread. If there are products out there where this type of daytrading performance is possible, please tell me. I would love to be wrong here.
Also, you say:
"if you are in the US you have to pay, which comes out to about 20% pro-rata, on 1256 contracts based on a 60/40 long/short term tax treatment"
followed by:
"most spreads on cfd's are not 20% bid/ask, so it is worth it"
That's a fallacy.
Not trying to give you a hard time, but the amount of taxes paid on profits should not be a concern for "aspiring traders". One must be profitable first and that's much harder to do when paying 3.5x the edge loss in bid/ask.
Well i disagree......i look at it from the calculation above....its simple math....if u come up with diff figures then good for you
There's an enormous fallacy that people keep repeating on forums, that the markets are the same now as they were 100 years ago. That's not true at all for intraday scalping. The algorithms can calculate in near-instantaneous speed all locations of stops, all entries at the market vs entries w/ limit orders (cumulative delta) and all open limit orders as well as stop orders. Try scalping Crude Light futures on a 50 tick chart and tell me that's the same as it was prior to high frequency trading. LOL