Stock market trading catches everyone’s attention because of the high ROI it brings on the table. Though the risk is high, the returns make up for it when the luck smiles at you. This may prompt you to indulge in trading throughout the business hours. Here are a few conditions to consider if you are thinking of trading in stock market frequently.
- Trade daily if you are a high risk taker
Apart from being a high risk taker, if you know how thoroughly how the stock market works, you may resort to daily trading. The intraday trading is the term used for the trading done throughout the day. Identify the trends of prices and rely on your news and research to speculate the next movement of the price and cash it out. Do have an able CA within your reach to help you understand the tax implications that arise from selling and buying the stocks frequently.
- Trade short term if you are ready to pay taxes
If your stock performs exceedingly well and delivers you sizable profit, this gain is termed short term capital gain. It is taxable and may attract the tax rate of 15%. Thus, you need to buy a stock and retain it for long if you want to avoid STCG tax. Also, keeping for long term may benefit you as the stock price may go higher with time due to changing market conditions and impact of news.
- Choose to trade frequently if budget permits
Trading quite frequently carries an element of risk. Hence, you may need to have strategy as well as extra money to cover losses if incurred. There is no fixed heating period for stocks to mature. They are available to sell right after you buy them. Hence, read a bit about the stocks’ best payback period and choose frequency to trade accordingly. Also, remember that if you choose to reinvest in the stock that you sold at a loss within a short period, the loss is not written off from the tax liability.
The final answer to the question is – there is no limitation on how frequently you trade stocks. All you need to do is good research and become aware of the tax liability that comes with frequent trading.
