Thursday, September 6, 2007
Worried about how much you'll have to pay in taxes this year? Here are five simple ways to decrease what you owe:
1. File your income tax return on time or obtain a filing extension. If you don't, you risk interest and penalties for late filing. You also lose the opportunity to make certain tax choices required on a return filed on time.
2. Use retirement plans not only to save for your retirement needs, but also to reduce current taxes. If you have not yet set up a retirement plan, consider a Keogh, SEP, or SIMPLE plan to put more away on a tax-deductible basis than you can under an IRA. Contact a financial advisor to set up a retirement plan.
3. Keep good books and records for your business. Keep these records separate from records of your personal expenses. Keep good records to track both small and large expenses; small expenses can add up to significant expenses. Keep these business records as long as necessary. Generally, this is at least three years after the date you filed your income tax return. In some cases, however, it's a good idea to keep records even longer.
4. Keep records to substantiate your travel and entertainment expenses for your business. While you don't have to keep receipts for expenses (other than lodging) of $75 or less, you must still note in a log or diary the business purpose for the expense, the date it was incurred, and the amount you spent.
5. Make sure to run a part-time business in a business-like manner, in case it incurs a loss. By keeping records of your part-time business, you'll be able to prove a profit motive and deduct the loss of the business from your taxes. Keep separate books, records, and business bank accounts and change business operations with an eye toward making a profit.
Your Money & You Staff have written a series of finance related articles. For additional information on related topics, visit http://yourmoney.accion.org
The Truth - Computerized Commodity Trading Systems, PART 4 - Include The Basic Human Fears!
To get a computerized system edge, you need to figure out the basic human trading weaknesses and include them in your software. Anyone can buy a trading system these days, but it will have little value unless it is unique and different from the crowd. Here's some easy-to-understand ideas I use that add in the human fears!
To develop a catastrophic exit plan, we need to look back over the history of trading for the e-mini futures contract market. A computer can easily do this. Figure out after the initial sell-off, over the last X period of time, what price swing has the futures very rarely reached? Is this ten points, fifteen points or what? You need to come up with a super panic number that will get touched maybe once every three months or so for day trading.
So what’s this equate to in dollars? If you are trading small e-mini futures lots like you should be, it will be equivalent to a good day or two’s day-trading profits. This is a small price to pay to enable you to survive many trades that start out real bad but end up to near break-even. The key here is that you need to be positioned in the market at a manageable risk for as long as possible. If fact, if you could be in the market ALL the time with probability on your side and tiny risk if wrong, that would be the ultimate.
In contrast, what happens when we get stopped out right away? We give up the opportunity to be positioned for the move. How many times have we said, “If I only had my original position,” or, “I got stopped out at the exact low again!” If we can train ourselves to be more humble and accept that we do NOT know where the exact bottom will be and that it’s OK to be wrong for a while, we will evolve to the next level.
Let the e-mini futures market be what it really is… a roller coaster that keeps moving up and down. You want to keep buying this coaster on the dips and selling it on the peaks as it flows. Yes, try to stay with the main trend, but don’t worry about your current profit and loss until the computer says to get out on the next favorable rally whether profitable or not.
Getting stopped out too early in panics will eventually eat up your commodity trading account, or make you a break-even trader at best. By scaling in and scaling out you will be doing the opposite of the crowd. When the crowd is getting stopped out you will be excited to see another opportunity to average for a better price. But always execute your uncle point after one or two averages and no rebound occurs.
You want to make the odds work for you by letting more “bad” market time work for you, while your competition only takes advantage of the more rare “good” times. Like any risky technique, averaging down must be used sparingly. Ideally, if you are an intuitive fuzzy logic e-mini futures trader rather than a rigid system player, you can make a choice to average more aggressively when high probability set ups appear. Profitable trading IS an art.
Remember that there are special times when the e-mini futures market can go one way for days at a time. If you are witnessing a huge move like this, give the market some time to play its energy out before standing in its way. Or simply stay with your one-way trending model on this big days.
After a couple of days these one-way markets end and the e-mini market gets back to its normal choppy self. These one-way moves can do a lot of damage if you fight them. Probability will allow the market to clean out every method known to man, given enough time. Scaling in and being humble also applies to your general trading methods. Know when to lay off for a while when your models stop working and then later start up - slowly.
Small improvements every day make huge differences at year end. Work hard to find new and unique ways to make your trading even better!
Good Trading!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
The Truth - Computerized Commodity Trading Systems, PART 3 - Include The Basic Human Fears!
To get a computerized system edge, you need to figure out the basic human trading weaknesses and include them in your software. Anyone can buy a trading system these days, but it will have little value unless it is unique and different from the crowd. Here's some easy-to-understand ideas I use that add in the human fears!
We’re all basically wired the same. We need to be humble and admit that we really don’t know the exact point to get in or get out of a market. That’s why scaling in and scaling out of the e-mini works so well. To think we can pick the exact top or bottom on the first try is being arrogant.
One common public method of entering the E-mini is to buy a breakout and then place a stop three points below. If the stop gets hit they are relieved to get out with a “small” loss and the story is over. But, why should it end so abruptly just because we didn’t enter within three points of the exact pivot point? First of all, buying a breakout gives much of the price buffer away. Buying a dip would start us out on a better risk footing.
Let's get back to the point about scaling in and out. When the market gets tough, the tough get going. Figure the e-mini futures market is like a roller coaster. That’s really a perfect analogy. It occurred to me in a dream. We need to have a plan to respond in any way it can maneuver. The only thing we can assume is that it will have rallies after it has declines. The e-mini rallies may not bring it back to the original place (a bear market) but price will usually come back most of the way.
Let's say you buy on a sharp break. The market drops again and you average in another contract. The market then breaks again and you buy a third small lot. By this time most everyone would have been stopped out and demoralized. But because you are buying SMALL e-mini contract lots, you have staying power! You have the biggest bankroll simply by trading super small. Now the inevitable rally bounce comes.
At this point, you don’t look for a profit, but look to minimize your loss after being a bad trade. You look to get out as close to even as possible. Let the computer signal tell you when the rally has peaked and get out without hesitation. You have now faced the second to worst scenario and survived while your competition has probably taken it on the chin.
These “saved” e-mini trades all add up on the bottom line. It’s like a penny saved is a penny earned. If you are good at getting yourself out of bad situations, the good trades are all that’s left! In the previous example we have beaten three human problems. We have survived the human tendency to eliminate pain quickly when getting stopped out on the first sign of failure. We beat the fear of adding to a bad situation. Also, we avoided the greedy tendency to hold on for bigger gains when things finally go our way. (the rally) Read the previous two paragraphs over until this e-mini trading technique is clear.
Now, lets take the worst scenario. The e-mini futures market just keeps going down with no rallies. Remember that if you buy into a panic, you already have a great price buffer. Buying into two more sell-offs increases the probability of a rally. We want other traders to get stopped out so that the market can then rally. But, if the market keeps going down, we need an uncle point to spit out all the contracts.
We need an "uncle point" because human nature will again hurt us by turning us numb and paralyzed when facing a big loss. When we are facing a big loss and/or the hope to get it all back, we can sometimes do stupid things, like continue to hold on. It becomes almost suicidal, like we have nothing to lose. And this extended panic move will eventually happen, no matter where we put the stop. Probability in the e-mini futures market allows for everything, given enough time.
Part Four of Four - Next!
There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.
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