How to Trade Stocks As a Home Business?

 Trading stocks as a home business can help a person gain financial and lifestyle independence. While 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 day trader on your tax returns allows you to take advantage of higher losses in your business, according to the IRS.

1

Pay off debt as much as possible. Debt sits over your head, creating stress that can affect your decisions when 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.

2

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.

3

Write down a 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.

4

Subscribe to daily financial journals, such as the 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.

5

Open an online discount trading account. Several online brokerage firms offer trades with low cost transaction fees. Link the trading account to the bank account you opened for trading.

6

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

7

Create a spreadsheet that tracks your 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.

8

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.

9

File IRS Form 4797 with your taxes to realize more than the standard investor's $3,000 annual losses against capital gains. The term "trader" is ambiguous as defined by the IRS, 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.