You should only short term trade with your 401k. It sounds perverse i know, but there is no tax liability for changing your position. Your long term trades will get a lower capital gains rate regardless.
You're saying, "if you're going to short-term trade, you should use your 401k to do it in preference to any other funds source", right? Because there's a way to read this where you're saying "the only way you should trade with your 401 is short-term".
Traditional 401k incentives line up horribly with saving for the future. And if you expect taxes to rise, an unmatched 401k might would be an on balance negative except for the tax free rebalancing you can do.
I'm going to use this conversation as a teaching example in my law-school contract drafting course.
(In contract disputes, the parties' lawyers will often look for exploitable "security holes" of this kind, i.e., places where the contract's language can plausibly be interpreted in multiple ways and the choice of interpretation affects the outcome of the dispute. A big part of the job of contract drafters and reviewers is to try to spot and eliminate such weaknesses before the contract is signed, but that doesn't always happen.)
I did some work one time for a patent attorney. When he was teaching me how to draft patents, I being on the minimalist side would always balk at repetition - such a long lists of items that are especially synonymous or things already stated elsewhere. He agreed that they were kind of dumb and repetitious but the purpose was to have it on multiple places in case it was vague (or too specific!) in any single description. It annoyed me to no end.
Also the recent Maine dispute over the oxford comma kind of made me understand that better.
I came up as a patent attorney; I always found it useful to create defined terms and use them (in initial caps) as needed, in the same vein as defining a variable in software.
