I'm new to trading and I have a question on how profits are taxed for someone without trader status. I understand these traders can only deduct up to $3k in losses and are taxed on their gains however appropriate for futures, stocks etc. Here's my question: Say a trader has a profitable trade on Monday and makes $5k. However on Wednesday, using that additional capital in his account, he makes other trades and he loses the $5k he made earlier in the week. Is he going to be taxed for that money at years end though he no longer has it, or does the IRS simply look at the bottom line? In other words, does the IRS simply add up all the profit he has left in the account at tax time and tax that, or do they hold Joe trader responsible for every dollar made along the way, whether or not he's lost it in subsequent trades. The above scenario wouldn't involve withdrawing funds from the account or getting checks from his broker. Thanks guys.