u/BAMred

You're 50+ and getting worked up over petty stuff. Your swing looks good. Don't take criticism so personally, especially if you're asking for advice. It really doesn't matter if you're right or wrong. Good luck and take care.

How do you finish a 40 hour week by Tues at noon?

You're trying to help and he's calling you names.

TIL -- IRS publications offer ZERO authority in court cases. You need to follow the actual law.

in this case, the law is: The Statutory Authority: IRC § 162 (Trade or Business Expenses).

and this doesn't even define Trader Status. In fact, Trader status was invented in the courts notably:

• Groetzinger v. Commissioner, 480 U.S. 23 (1987) — Established that a trade or business requires activity conducted with continuity, regularity, and a primary purpose of earning income/profit.
• King v. Commissioner, 89 T.C. 445 (1987) & Paoli v. Commissioner, T.C. Memo. 1991-351 — Defined trader vs. investor based on seeking short-term market swings vs. long-term holding.

yes, I have reviewed pub 429. Honestly, it's not very detailed. https://www.irs.gov/taxtopics/tc429

The Trader Status definition is somewhat vague here. Statements like this are somewhat ambiguous --> "circumstances should be considered: The extent to which you pursue the activity to produce income for a livelihood". Does this mean you cannot have another job? What 'extent' is the IRS's threshold? What if you have a lavish lifestyle from being independently wealthy but also rely to a lesser degree on income from trading and you meet the other criteria?

I'll have to check out the optionstaxguy court cases. but it looks like the most recent cases are > 13years old. Do you have any more recent cases? Thanks for the link.

You seem somewhat knowlegeable in this subject. May I ask what your experience is?

Does the IRS maintain this claim?

Why does starting a trading business require quitting your full time job? You can run more than one business, no?

thx for the advice. I'm going to start a trading business in 2027, so I think mark-to-market is the way to go. For this year I'm going to quit trading for some time, or at least change the universe to a significantly different cohort. So I don't plan on to live through this nightmare. But it's an interesting consideration, and Learning more about it makes me realize how important it will be to avoid these waters.

do you have the ability to report it one way on your tax return if the broker arbitrarily reported it a different way when there is no IRS guidance to say otherwise?

Ie overfit it till it performs better

You need to power your study appropriately. This isnt powered high enough. It's possible your profit is just by chance of the backtest rather than true alpha.

Most of the profits are from quick jumps. Most of the time is sitting for 1-2 years without any profit, maybe even losing money. You willing to wait for 3-4 years in a real account before realizing this strategy was overfit?

Too much head movement

Looks like the composer strategy is doing well. Hopefully you're invested.

I think the point that I was trying to make a few years ago was more of the extra benefit from moving in and out of tqqq and trying to capture extra alpha I doing these volatility plays and trading sqqq, etc, weren't actually adding a ton of benefit relative to just tqqq by itself. The huge profit spikes were due to overfitting and cherry picking. And when you compare the TQQQFTLT version 4.1 that you shared is simply t22q, they both roughly doubled in the same time frame. They also both had tremendous volatility.

Looking at the version that you shared, it's composed of amd, tesla, and Nvidia. Allthough these may continue to pump for the next few years, I still think it's a tough argument to make that a strategy that's composed of single stocks could be successful long-term while ignoring the inital selection bias of the stocks themselves to begin with.

Overall, probably you could make some money with this, even though the claimed benefit over tqqq may be over fit imo. Good luck!

and perhaps more importantly, I presume you've never heard of a legal case where the IRS deemed two different ETF symbols identical enough to disallow losses?

yes, sorry if my terminology was incorrect -- I'm not in finance or tax finance!

Do you see any problems with this? From what I gather, many brokers only look at the ticker symbol names, and if they are different, then they don't label it as a wash sale. Exactly what you mentioned. I just want to make sure that even though they are different tickers, they are considered 'susbtantially different'. I understand that the IRS is not give exact definitions of what's substantially different constitutes, but I like the 70% difference rate as a rule of thumb.

However I'm not sure you even need to be that different. For instance many people will use a total stock market etf to TLH an SP500 etf, which overlap by ~88% by weight and have a historical daily-return correlation around 0.989. So it seems like 70% is overkill.

That said, I may consider this 2nd universe:

MIDU — leveraged equity
FAS — alternate leveraged equity / financials
XLC — communication stocks
XLY — discretionary stocks
SLV or PPLT — metals
SHY — short Treasuries
WTMF — managed futures
BTAL — defensive / anti-beta

but I don't have a good volatility etf that's substantially different.

Thoughts?

why?

can't you do both?

if you have disallowed losses from swing trading, you can sell the security and wait for 31 days. this 'recaptures' your ability to use the loss on your tax return.

are you confusing correlation with covariance? For my understanding correlation units are percentage points whereas covariance doesn't use percentage point says it's units and is not limited by bounds of 0-100.

(trying to follow, thx)

What's your experience with this, if you don't mind me asking. Are you a cpa, lawyer?

I'd have to calculate the wash sale losses. I have a script for it, but to give you an idea, it's a 10k account with 100k of trades over the year, over approximately 2k-ish different transactions. The year has had ups and downs, so there's definitely some loss mixed in with the 2026 gains. Probably 30k if I had to guess.

I was considering ramping it up next year, so I'm treating 2026 as a proof of concept, yet I'm not sure if I want to switch universes or just exit for December plus a few days buffer in Nov which would be safest. But since this is a proof on concept, I'm more inclined to try the universe switch to see how it pans out.

Let's say my broker doesn't catch it, but I have substaintial gains and disallowed wash-sale losses that I want to recapture the losses. ~1M gains and ~1M losses. Even though the broker doesn't catch it, would the higher dollar value attract the IRS' scrutiny?

thx for the advice.