What are the consequences of being classified as a day trader, in Australia?
In Australia the ATO can determine if you are considered a shareholder or a share trader. The ATO defines a shareholder as: A shareholder is a person who holds shares for the purpose of earning income from dividends and similar receipts. Whilst they define a share trader as: A share trader is a person who carries out business activities for the purpose of earning income from buying and selling shares. To find out the differences between them you can refer to the following link describing The difference between a share trader and a shareholder. The ATO also describes: To be classed as a share trader, you may be asked to provide evidence that demonstrates you are carrying on a business of share   trading, for example: the purchase of shares on a regular basis through a regular or routine method a trading plan  use of share trading techniques in managing your share acquisitions, such as decisions based on thorough analysis of relevant market   information a contingency plan in the event of a major shift in the market. Losses incurred in the business of share trading are treated the same   as any other losses from business. If your activities change from investor to trader, your investment changes from a CGT (capital gains tax) asset to trading stock. This can trigger CGT event for any investments you currently hold as they change from CGT assets to trading stock. Once you have changed over to a trader you will not be entitled to the 50% CGT discount for stocks held over 12 months. You will, however, be able to count any paper losses at the end of Financial Year to reduce your other income.
This can be done, you can be prosecuted for some forms of it, in any case there are more riskless ways of doing what you suggested. First, buying call options from market makers results in market makers buying shares at the same delta as the call option. (100 SHARES X DELTA = How many shares MM's bought). You can time this with the volume and depth of the shares market to get a bigger resulting move caused by your options purchase to get bigger quote changes in your option. So on expiration day you can be trade near at the money options back and forth between being out the money and in the money. You would exit the position into liquidity at a profit. The risk here is that you can be sitting on a big options position, where the commissions costs get really big, but you can spread this out amongst several options contracts. Second, you can again take advantage of market maker inefficiencies by getting your primary position (whether in the share market or options market) placed, and then your other position being a very large buy order a few levels below the best bid. Many market makers and algorithms will jump in front of your, they think they are being smart, but it will raise the best bid and likely make a few higher prints for the mark, raising the price of your call option. And eventually remove your large buy order. Again, you exit into liquidity. This is called spoofing. There have been some regulatory actions against people in doing this in the last few years. As for consequences, you need to put things into perspective. US capital market regulators have the most nuanced regulations and enforcement actions of worldwide capital market regulators, and even then they get criticized for being unable or unwilling to curb these practices. With that perspective American laws are basically a blueprint on what to do in 100 other country's stock exchanges, where the legislature has never gotten around to defining the same laws, the securities regulator is even more underfunded and toothless, and the markets more inefficient. Not advice, just reality. I'm having a difficult time understanding how Chevron is avoiding taxes through party related loans. From my understanding, Chevron is providing loans to its Australian subsidiary at interest rates higher than market benchmarks. Does this shift profits from Australia to the U.S. and how does it help Chevron avoid taxes even though the corporate tax rate is higher in the U.S. than in Australia? Wouln't they want to be taxed at the the lower tax rate in Australia than in the U.S.? The more description the better, thanks! Edit: I think I understand that Chevron is giving out large loans with high interest rates to its subsidiary in Australia and I think the Australian subsidiary is converting its revenues to pay back the loan thus looking like profit in the corporation's books in Delaware. How is the money to pay back interest being raised if not from revenue? And how is that revenue not being taxed? "It looks like these types of companies have to disclose the health of their accounts to CFTC (Commodity Futures Trading Commission). That is the gist I get at least from this article about the traders that lost money due to the Swiss removing the franc’s cap against the euro. The article says about the U.S. retail FOREX brokerage: Most of FXCM’s retail clients lost money in 2014, according to the company’s disclosures mandated by the CFTC. The percentage of losing accounts climbed from 67 percent in the first and second quarters to 68 percent in the third quarter and 70 percent in the fourth quarter. Side note: The Swiss National Bank abandoned the cap on the currency's value against the euro in mid-January 2015. But above paragraph provides data on FXCM’s retail clients in 2014. It could consequently be concluded that, even without ""freak events"" (such as Switzerland removing the franc cap), it is more likely for an investor to NOT make a profit on the FOREX market. This is also in line with what ""sdfasdf"" and ""Dario Fumagalli"" say in their answers." If I buy 10 stocks on Monday and sell the same on Tuesday (different trading day) would I be considered a day trader? No. It is only counting if you buy something and then sell that same something during the same trading session. And that counter only lasts for 5 days, things that happened outside of that time period get removed from the counter. If the counter reaches a number (three to five, depending on the broker), then you are labelled as a pattern day trader, and will have your trading capabilities severely restricted unless you have an account size greater than $25,000 As I understand agency trading is where you execute an order on behalf a client, what I don't understand is what is where the skill comes in. You're not running a book, so you don't warehouse risk/manage it, and so where does the skill enter especially when it comes to stock trades? Long-term capital gains, as you note, get special tax treatment.  They are lower than regular income tax rates.  Short-term capital gains aren't penalized, they are just treated as regular income under the regular rates.  So, from a tax perspective, the day-trader gets by the same way as the rest of us because they are paying the same rates on the same progressive income tax scale. Compare the different trading accounts available at Money and MoneySuperMarket. All are regulated by FSA and they give protection according to the FSA standards for client deposits i.e. deposits distributed across multiple banks. I personally hold a trading account from Selftrade. You can find statements like below, in their terms and conditions regarding protection of your money deposited with them. If we cannot meet our obligations, your investment may be protected by the Financial Services Compensation Scheme. Compensation is provided for 100% of £50,000. I'm talking about day trading here. Automated day trading never worked for me. But I will also admit I am terrible at automated day trading. I'm sorry if the premise of my post sounds off. I know it sounds like I'm being an idiot by not going the automated route, but it works for me and that's why I'm going to stick with my own techniques. Why change it if it's working?