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Trade-Tracking Software: No Package Is Perfect

Whether you're a trader or an investor, you need to closely track your trades so that, come tax time, you're not scrambling to sort though the paperwork.

We've received many inquiries about which software programs are geared to traders' needs. With the help of readers who have emailed in their suggestions, as well as the manufacturers of the software packages, we'll sort out what works and what doesn't.

In a nutshell, you'll be hard-pressed to find a software program that can handle all your needs. For example, some software company representatives we contacted have never even heard of the wash-sale rule. Some of the programs also have trouble with short sales and margin accounts.

Let's take a closer look at your options, beginning with the most widely used consumer finance programs and working our way up to programs for advanced investors and professional traders. Remember, I'm not a day trader, and I haven't tested these packages. These profiles are based on readers' and manufacturers' comments.

Software for Investors

Intuit's Quicken: The most popular financial software package, Quicken costs around $60 for the basic version and is great for tracking the trading activity of an investor. But if you start to get fancy, you'll quickly hit some limitations. The wash-sale rule is a good example. Quicken 99, the latest version, won't alert you when a trade you make violates the wash-sale rule. The program "was not designed to do that kind of trading," says Intuit spokeswoman Cecilia Denny. The program also can't handle short sales or margin accounts.

Microsoft Money: Quicken's main competitor, which also costs around $65 for the more deluxe Financial Suite, doesn't support the wash-sale rule either, "though it is something we are aware of," says Peter O'Hara, a tester for the investments area of Money.

The program can handle short sales, says O'Hara. "If you go to the Answer Wizard in the help section and enter 'short sales,' you'll get a ton of information on how to do it," he says.

Money also trumps Quicken in handling margin accounts. When you set up your investment account with Money 99, the latest version, you need to set up an associated cash account that'll monitor your margin interest. If you don't, the program won't calculate your margin interest as part of your profit or loss.

By the way, most online brokerages will allow you to download your account data directly into Quicken or Money. Here's a breakdown:

Direct Downloading of Trade Data to Software Programs

Brokerage Into Quicken? Into Microsoft Money?
Datek Yes No
DLJdirect Yes Yes
Discover Yes Yes
Schwab Yes Yes
E*Trade Yes Yes
Fidelity Yes Yes

Software for Advanced Investors

Captool: "The best software, bar none," raves reader Bob Hockenhull. The package acts like a portfolio manager. It'll help you keep track of your transactions and generate reports and graphs. For $250, you'll get a running tally of your capital gains or losses that you can just plop onto your tax return.

Though some day traders love the program, Robert Hobbs, president of Issaquah, Wash.-based Captool, says he discourages them from using it. "We prefer to sell to long-term investors," he says, because day traders expect a level of support the firm can't provide.

LiveWire: This program is designed primarily as a research tool for day traders, says Robert Krupnick, president of CableSoft, which makes the $600 program (the price rises to $1,295 on Feb. 1). You can't execute trades with this software, so the hard-core day trader might not be happy with it. But reader Ronald Papa likes the tax reports the program generates. "The Cash Transactions Report is a chronological audit trail that is essentially an ongoing cash balance account, similar to your checkbook, that accounts for gains, losses, interest, dividends, margin interest, and so on," he says. "The Tax Report summarizes your investment transactions, associated gains and losses, dividends and interest. Both reports can be generated for any period stipulated, such as daily, weekly or monthly. It does not account for the wash sale, to my knowledge."

The software will generate a Schedule D-like form for you, but it won't differentiate between long-term and short-term trades, adds Krupnick. Neither will it alert you if a transaction is subject to the wash-sale rule. But when you make a sale, you can pick the lot you're selling to avoid violating the rule, he says.

Software
Package
Web site
Money www.microsoft.com/money
Quicken www.quicken.com
Captool www.captools.com
LiveWire www.livewire-cablesoft.com
Trade Tracker99 www.pcstartups.com
CyBerTrader www.cybercorp.com

Software for Professional Traders

RealTick III: You need to be a client of a day-trading firm -- which is essentially a brokerage firm that allows its clients to execute their own trades -- to get access to this program. You can't simply buy it from a store or Web site. Depending on the broker, it'll cost you as much as $300 a month, or as little as nothing if you make more than a 50 trades a month.

RealTick III offers real-time quotes and news, and it links to your brokerage account and allows you to execute your own trades.

RealTick III offers an additional software package called Trade Tracker99, which automatically logs all your trades and keeps a historical record, says Baron Robertson, founder of the Elite Trader Web site , who has done extensive reviews of trading software. You can hit "print" at end of the day and get a profit or loss figure that has your commissions and Securities and Exchange Commission charges already factored in. "And it definitely tracks your shorts, for sure," says Robertson.

The package costs from $50 to $100, depending on whether you buy it from your broker or directly from the manufacturer, and includes three other trading programs. You must have RealTick III in order to be eligible to buy Trade Tracker99.

CyBerTrader: You also need to be a day-trading-firm client to have access to this program. It's a stock-trading package -- much like RealTick III -- that offers you real-time quotes, charting, positions management and daily profit-and-loss balances. And the cost, again, depends on your trading volume but can range from nothing to $250 a month.

CyBerTrader doesn't offer a neat little add-on package like Trade Tracker99, but help is on the way. Currently, the company offers a spreadsheet for free that allows you to sort raw data in many ways. For instance, for capital-gains purposes, you can sort by dates to determine which trades are short-term and which are long-term. The software won't alert you when you're in danger of the wash sale, but again, you have the ability to pick which lots to sell. And it handles short sales and trades on margin.

TSC aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All are urged to consult with an accountant as needed about their individual circumstances.

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