About what percent of traders do you think trade in a tax-advantaged IRA to avoid the stiff tax on short term selling? I was just curious.
is the reason because traders need access to the money whenever and can't afford to have it locked away in the IRA without paying the penalty?
Create as many tax-free income streams from your Roth IRAs/etc. Pay yourself the dividends. Be your own bank.
Here you go. Stay off the radar. The less you make, the less they take. http://www.fool.com/investing/dividends-income/2005/11/21/the-working-mans-roth.aspx Same concept here: http://www.taxalmanac.org/index.php/Discussion:S_Corp_Owner_Salary_vs._Distributions Knowledge is powerful.
Remember that you pay your full tax rate on all eventual withdrawals from a traditional IRA. So you really are not escaping the higher taxes on short term profits versus long term, only delaying them for a time when your tax rate may (with emphasis on the word "may") be lower than it is now. And you are not getting the break on any long term profits in a traditional IRA! On the other hand, a Roth account seems to offer some real advantages for investors since any earnings and dividends are tax free. A good trader who does not need the current income could shelter all of their gains from tax by trading in a Roth Account. However trading in a Roth is decidedly less flexible, since shorting, or any trade with an undefined maximum loss is disallowed. However it is possible to short via options and inverse trading instruments in a Roth. The idea of investing in high yielding stocks in a Roth, as suggested above, is indeed an attractive proposition since all of the dividends and capital gains are tax free. One would want to reinvest the dividends, of course, until after age 59 and 1/2.
I don't believe you will be able to leverage a Roth. So far as I know all brokers are going to treat it as a strictly cash account. Day trading in one is impractical, assuming your broker allows it at all, but certainly one can swing and position trade in a Roth.