I know the title is stupid, but why does the IRS punish traders for managing their risk with wash sales?
For example, say a stock is worth $20 and has short-term support at $18, and really strong long-term support at $10. Say I place a buy order at $18.50 and ideally would set my stop loss just below the shorter term support at $18. Say price goes below my stop and it triggers, but I still want to be long on this stock in the long term. Say I rebuy weeks later after it goes down to $10 where I figured there would be stronger support. But now this all counts as a wash sale and my initial loss isn't tax deductible because I managed my risk instead of holding to $10 where it might bounce?
I feel like this just encourages bad trading, any thoughts or tips? Are there ways to manage risk and avoid wash sales?
Thank you!
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