• Trading Stocks as a Home Business

  • stockhomebusinessTrading stocks as a home business can help a person gain financial and lifestyle independence. While stock trading does offer lifestyle flexibility and perhaps unmatched financial returns, it also comes with substantial financial risk. If you are considering trading for your livelihood, you need to properly establish yourself with the resources and mindset. Like any business, preparation and planning are essential for success. Defining yourself as a stock trader on your tax returns allows you to take advantage of higher losses in your business, according to the CRA.

    Step 1- Pay-off Debts

    Pay off debt as much as possible. Debt sits over your head, creating stress that can affect your decisions when stock trading, trying to get a little more out of each transaction. Pushing trades in this manner leads to transactions and choices that do not follow your trading parameters.

    Step 2- Create a Funded Trading Account

    Create a trading fund and open a separate bank account for it. Like all businesses, you may be strapped for capital when starting out, but do what you can to establish a fund that is separate from savings you need to protect your family’s financial security.

    Step 3- Learn a Proven Trading Strategy

    Learn or acquire a proven stock trading strategy. Many trading strategies are available on the market, but you can choose your own investment strategies, which should include the parameters on how you choose stocks, when to purchase them and when to sell. Writing down your parameters helps you create a non-arbitrary business operating system. Find out if anyone you know is successfully trading stocks. Ask to see their accounts for proof and if they could mentor you or put you in touch with the company that leads that strategy.

    Step 4- Subscribe to Learning

    Subscribe to daily financial journals, such as the “Wall Street Journal” or “Barron’s,” as well as online resources. These provide you with the daily information you need about all factors affecting your investments including political developments, economic data and industry specifics. Register for stock trading courses and be prepared to be educated.

    Step 5- Open an Online Trading Account

    Open an online discount stock trading account. Several online brokerage firms offer trades with low cost transaction fees. Link the stock trading account to the bank account you opened for stock trading. Look for a broker that offers a low commission and minimal fees for currency conversions.

    Step 6- Establish a Trading Budget

    Establish stock trading budgets, limiting investment dollars in any one stock. Set budgets with daily and weekly trading limits.

    Step 7- Track All Your Trades and Learn from Losses

    Create a spreadsheet that tracks your stock investments, establishing parameters for the dates of purchase and sale and the costs involved. According to Smart Money, financial software that maintains this information will prepare properly for filing taxes.

    Step 8- Follow Proven Disciplines

    Buy and sell according to your strategies, and be disciplined with your budget. Ups and downs occur, but don’t deviate from your parameters. A lack of discipline leads to bigger losses and failure.

    Step 9- Learn Tax Filing Guidelines

    File your taxes according to CRA guidelines. The term “stock trader” is ambiguous as defined by the CRA, but someone who trades for a living and is regularly seeking short-term gains may qualify. Consult a tax adviser if you have questions about whether you qualify for trader status.