THE FLOOR TRADER AND THE SPECIALIST 207
necessitates the constant taking of losses. There is no magic
and infallible formula available to the floor trader as he stands
about the posts on the Exchange floor and makes his trades.
Years of experience and the highest degree of natural aptitude
and ability in the business do not prevent him from incurring
frequent losses. His aim must be, therefore, not so much to
avoid losses absolutely—for this would be utterly impossible—
as to overbalance his losses with his profits.
But even if he is successful in three out of four trades, his
net profit is not $25, or anything like it. To begin with, as we
have seen, he usually is forced to pay some commission house
$1 or more on each 100 shares to clear his trades, or else assume
the considerable overhead expense of becoming a clearing mem-
ber himself and providing the office machinery required to per-
form his own clearance. In either case the clearing expense is
just as great on an unprofitable as upon a profitable transaction.
Thus, on account of this expense alone, his net profits on a
successful trade can be only $11. 50, and his loss on an unsuc-
cessful trade will be $13.50.
State and Federal Stamp Taxes.—But this is not all. On
every sale of 100 shares of stock of $100 par value he must
pay $2 for the New York State tax stamp and $2 for the Fed-
eral tax stamp. These tax levies in themselves seem small
enough, for both amount to only 1/25% of the par value of
the shares. But when the small profits for which the floor
trader deals are remembered, the matter assumes a very dif-
ferent aspect. Moreover, he is taxed just as heavily on his
losses as upon his profits. Counting in these taxes, when he
makes 1% on a trade his cash. profit is only $7.50, while when
he loses 1% on a trade his actual cash loss is $1 7-50. In conse-
quence, if three out of four of his trades are successful, he
makes a net profit of only $5. And to be 75% successful in
this business, with its stern demands of swiftness and accuracy
and with its constant risks, is, as any floor trader will testify,
no slight achievement.
