Daytrading

Trotskisaurus

Dear Forum

I am not sure if this is the right place to ask this but I imagine someone on here will have more knowledge than me!

A friend of mine works as a daytrader over in the US. He has kindly offered to show me the ropes using paper-trading.

I was wondering though, as a citizen of the UK, exactly where I would stand if I did daytrade however.

- Is it legal?
- How is it taxed?
- Can I trade on American or other markets?

Any help you can offer would be great!

MoneySaverLog

Yes
Not taxed if it's not you main income, if you use a spreadbetting account like IG
Yes, though not all US Stocks are spreadbetable

Speadbetting is highly leveraged, you can lose more than your initial deposit. High reward, high risk.

Trotskisaurus

Thank-you for the quick and helpful reply! If it was someone's main income however how much would they pay in tax?

MoneySaverLog

As per UK income tax laws. You have a personal allowance which is not taxed. Then you're taxed at 20%, 40% and 45%

http://www.hmrc.gov.uk/rates/it.htm#2

And the worst of it is you cannot claim losses as expenses.

Trotskisaurus

Haha! That'd be slightly too much to hope for I suppose! Ah so basically you could trade in futures and as long as you didn't earn beyond a certain threshold overall you wouldn't be taxed? Seems fairly reasonable. Would you have to register as self-employed if you were a daytrader?

MoneySaverLog

Yes, if it was your main job. Personally, I'd get a job and trade on the side. You'd avoid tax issue then and would not need to register.

Trotskisaurus

Now that is an extremely good idea! Though I am a long way away from the trading I think!

MoneySaverLog

I don't know who is going to train you. But MOST people lose money on spreadbetting. Including me. When they fist start. So start off small and expect to blow the bank.

I'd advise getting a demo account with capital spreads, there is no demo on IG only tradesense.

Then practice and keep a diary, why you got in, why you got out, what your entry is, what your planed exit point is. Trade with a stop loss, I'd advise Guaranteed, though you'll pay extra in the spread for this peace of mind.

The diary would be a really good tool to identify where you are going wrong, and what you need to correct. Most people will trade with emotion letting losses run and cutting profit short. No one is immune when real money is on the line.

Hope it helps, but know I lost my shirt trading a while back so very reluctant to jump back into that game.

Trotskisaurus

I've just realized i've made a rather foolish omission; I would be trading in Futures rather than spread-betting.

I am rather new to the field so I apologize for my error!

MoneySaverLog

You can spreadbet futures too, you just don't necessarily close out the position at the end of the day like a day trader would.

Trotskisaurus

Well these are encouraging responses; I was worried that futures trading would either be illegal or heavily taxed (I believe I heard about a 5% tax somewhere) and I shall certainlyy take your warnings and advice to heart; my friend said much the same actually!

How did you get into trading may I ask?

I am assuming from your replies then that I would be able to trade futures in the US oil and stock indexes as does my friend? Do you know how easy it is to transfer money internationally?

I am sorry to monopolise your time but its hard to get good quality advice like this!