How To Trade Year-End Tax Selling

With only four more trading days left in 2015 next week, traders are once again looking to take advantage of one of the most popular cyclical trading opportunities of the year: tax loss selling. This time of year can be the perfect time to scoop up underperforming stocks at depressed share prices after sellers have been dumping shares to lock in 2015 tax losses before the end of the year.

Why The Sell-Off?

American traders are allowed to offset 2015 capital gains with capital losses on their 2015 tax form as long as they close their losing trades by the end of the trading day on December 31. In addition, up to $3,000 of capital losses can be deducted from ordinary income per year as well.

In other words, there are plenty of tax benefits to selling stocks at a loss during the last days of the year.

Why The Bounce-Back?

Since the share prices of these underperformers are somewhat artificially driven down by tax-driven selling rather than fundamental market changes, they often bounce…

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