Slippage

Slippage - Unfortunate, costly and even embarrassing!

Slippage is the cost of doing business for an investor or trader.  It is very important for traders to keep slippage costs under control because they can seriously eat into profits.  Taxes, opportunity cost, and trade fees are all examples of slippage costs.

Trade fees can eat into your profits if you make many trades per week.  If every single trade costs around $16 and you make ten trades in a month you have accrued $160 in slippage costs.  Opportunity costs refer to the money you have in a decent or bad investment that could be in a better investment.

Taxes are a very dangerous type of slippage cost.  When you buy a stock and then sell it before 365 days have past you have to pay short term capital gains on any profit you make.  Right now the short term capital gains tax rate runs from 10% to 35%, (I just threw up in my mouth a little!).  That is really gross, and the worst thing is that you also have to pay taxes on all of the income you make at the end of the year.  This gives the Federal government a chance to hit you twice tax wise on your hard earned trading income!

When you are making a plan to trade stocks or even invest, please do some homework and know how much it will cost you to make stock purchases and sales, and MORE importantly the effects that taxes will have on your investing and/or trading strategy.

FYI:  Obama has purposed increasing capital gains taxes.  He came up with the idea while pulling the wings off of butterflies when he was enjoying a warm glass of fresh kitten blood.  Make sure to stay up to date on changes to the taxes that effect you.