The first way that day traders avoid taxes is through the market price adjustment method. This method takes advantage of the ability of day traders to offset capital gains with capital losses. Investors can get a tax deduction for any investment in which they have lost money and use it to avoid or reduce capital gains tax. The illegal selling rules apply to investors engaged in the practice of collecting tax losses, in which investors sell securities for a loss, but are prohibited from buying that same security (or a similar one) within 30 days of the sale.
Traders can realize the losses and then immediately turn around and buy the same value that they had sold. Negotiation-related expenses are deductible as business expenses. This is potentially a much more valuable set of deductions than ordinary investors can request. For example, you can request a home office for your business.
Investors can only deduct investment expenses that exceed 2% of their adjusted gross income (investment expenses are included in the “miscellaneous itemized deductions”).