Australian (ASX) Stock Market Forum

Setting up for day trading?

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29 June 2021
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Alright guys this might be a long so I appreciate the time taken to read and give replies.

How do I set myself up to truly day trade? I talking about getting an ABN (sole trader) and separate HIN from my personal (I don’t want my ETFs affected by day trading). Then getting the right book keeping – give us some examples? No one really talks about this or just straight up passes it off to “talk to a professional”.

To me it seems pretty coherent in terms of get an ABN for a sole trader off the ATO. Register for a brokerage account under the details of the ABN to get an HIN to separate transactions from your personal investments. Tell me if I am bloody wrong.

The bit that confuses me is getting the correct accounting methods to record your business revenue. FIFO? But what happens if you have a parcel in-between some trades you don’t, doesn’t that **** you up? For example:

01/01 Buy XYZ 100 for $10.00

01/01 Sell XYZ 100 for $10.50

01/01 Buy XYZ 100 for $10.60

02/02 Buy XYZ 100 for $10.30

02/02 Sell XYZ 100 for $10.50

Any advice?
 
Welcome to ASF. I sense some impatience and frustration in your first post here. Relax. The markets will be there when you're ready.

Day trading is so very simple anyone can do it. However very few people can do it profitably over the long term. If you want to be one of the few then you'll need a trading plan with a profitable edge. You'll need to know that you can apply your TP in real time while the financial media does it's best to distract you. You've got to have the confidence and persistence to trade your plans.

This aspect of a trading business is the hardest part to master. The overall admin of your trading business is easy to establish.

Yes, you should keep your investing and trading accounts at arms length in to order to ensure the tax benefits of each activity. It's in your interest to understand the ATO's definition of a shareholder (investor) and share trader.

The trading wins and losses generated from your trading business are not capital gains/losses. The receipts are considered income and you'll be required to pay tax at the EOFY if you make any profit over the year.

Once you understand the ATO's position then as a share trader the order of your buys and sells doesn't matter. The only thing of interest is the overall profit or loss for the year. There are a few other requirements to meet to be classified as a share trader. You'll have to keep records, have a business plan and be able to show that your trading activity is a business.

If you want to trade through a corporate structure (company) then it's very important to get advice from an experienced accountant. This has to be setup properly.
 
Thanks for the reply.

Undoubtedly, I still have a lot to learn and willing to pay the expense as I progress. I met some of the requirements for a trader in terms of frequency, ledgers and I would assume trading activity (8 trades min. a month) but no real business plan as of yet.

Once you understand the ATO's position then as a share trader the order of your buys and sells doesn't matter. The only thing of interest is the overall profit or loss for the year. There are a few other requirements to meet to be classified as a share trader. You'll have to keep records, have a business plan and be able to show that your trading activity is a business.

That is interesting thanks for that.
 


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