I recently got access to margin on my investment account. I have 2.5% monthly interest and so far I've not used more than 30% of my available margin.
My question, besides the risk of trades going the wrong way, and getting flagged for pattern day trading, is taking small profits ($40-150) on margin inadvisable?
I have my core investments in index etfs and solid companies. But to grab extra profit I'm utilizing margin to make more speculative plays between my monthly DCAing.
I'm more or less momentum trading. I see a stock that seems to be on an upswing or below a reasonable valuation. I take approximately $500 and then sell when I can make 10%+ profit. All on margin. If I stand to lose more than my initial buy in, then I sell.
My question: is it stupid to use margin in such a way? Scalping $50 here and there can add up. Of course the stock can go the wrong way, but with 2.5% monthly interest, holding for a few months isn't breaking the bank.
Do I have a blind spot here? Does anyone have experience with this sort of “semi-day trading”? After 25% capital gains tax am I better off not doing this? Would appreciate some outside opinions.
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