Trader Status

I am in US and am going to be opening up a real account soon after having used a demo and making consistent profits. I would like to know, however, what constitutes trader status. (How many trades per day, etc…). Also seeing how the forex market is 24hours, how would you close a trade by the end of the day so that you aren’t considered an investor. Thanks. I may actually use two accounts. One for day trading, one for swing trading. Any insight would be greatly appreciated.


Well, my friend who is trading in forex for many years, told me to open real account only if I am profitable with my strategy for atleast 4 mounths. But don’t forget that people ussualy are not profitable as soon as they are into forex, it also takes quite a lot time to learn and start earning virtual money not by gambling, but by trading.

And the number of trades per day, trading times, currencies, all these factors are up to strategy, and strategy should fit your personality, be comfortable to you.
For example I found strategy that made me profits, but it allowed to trade only 1-2 times per week, so I felt not comfortable with it and started searching for other strategies.
Closing trade also is only up to your trading style (scalping, day trading, swing trading, position trading) and trading strategy.

And I quess when you say “investor” you talk about carry trades, so if you want to avoid them, you have to close a position before the end of London session.

Hope that helps :slight_smile:

Thank you,
Albinas :slight_smile:

Who’s doing the considering?

What advantage do you hope to gain by closing your trades after a day?

I have different trading methods which are both long and short term which is why I may open two separate accounts for each method. By “they” I mean whoever is in charge of status determination. I presume it is the IRS. I am still unclear as to what the stipulations are for how to gain trader status come april 15th. All I’ve been told so far is close your trade by london close (12PM EST) which is rather insufficient.

From what I understand, there is a certain amount of trades that need to be made per day on average, and there is supposed to be a certain time frame for which you trade so that if you extend beyond that time with the intention of acquiring trader status, you will not be allowed. With stocks it is simple since open and close is same for everybody, but forex is 24 hours so it doesn’t seem so trivial.

Have you considered contacting an accountant?

From what I understand, this is no simple issue. Declaring “trader status” significantly increases your odds of getting audited, in which case you might need to have all your ducks in a row.

Sorry I can’t help more.

That may be what I do ultimately, however I have heard that many accountants don’t know much about traders since it’s sort of in its own field. Also, I have heard of them giving wrong information or not complete information (not intentionally).

True, you may have to find a specialist.

The same could be said for what you will hear on any forums. :smiley:

Ultimately, unless you’re trading significant sums, the money you’ll save on taxes may be offset by what you’ll pay your accountant, no?

I was under the impression that the savings of trader status was significant. Again, I will need to speak to somebody about specifics.