Secrets to Successfully Making Forex Trades

Secrets to Successfully Making Forex Trades

Beginners in the world of foreign exchange trading usually ask: “What are the secrets for successful forex trading?” The answer is simple: make an effort to make each transaction a successful one. One has to be mindful of both the accumulated profits and losses. There should be some level of awareness when it comes to the fact that everything can change within a blink of an eye or a snap of a finger. Therefore, the secrets to success are: carefully paying attention and adapting to changes.

It has already been established a long time ago that forex trading can be quite tricky and it is not for everyone. It takes some practice before forex trading can be mastered because it is confusing and you need to deal with the constant calculation of your ratio between profit and loss.

First, you have to be aware of the fact that foreign exchange futures and options are categorized under the IRC1256 contracts. According to this contract, traders get tax consideration that is quite lower than the usual. The ratio for tax consideration is 60 percent is to 40 percent. This means that 60 percent of the gains or losses are considered to be long term capital. The remaining 40 percent are then counted as short term capital.

The second consideration is the tax rate. Everybody should care about this particular aspect. When you are trading stocks in the forex market in a period less than one year, you need to understand that you are taxed at a rate of 35 percent for short term capitals. On the other hand, if you are trading options and futures, the taxation rate is lower – it is only pegged at 23 percent.

If you wish to be truly successful in the world of trading, you need to be mindful of your taxes, too. These are some things that you have to keep in mind at all times:
At the beginning of the year (January 1), each trader is expected to elect his tax situation type. For beginners in the world of trading, the decision making should be done right before doing your first trading transaction. Note however that the status can be changed in the middle of the year, pending approval from the IRS.
To avoid future problems, you need to keep your records clean and keep them well. If possible, prepare backups for your records. This way, you will no longer have to spend too much time at the end of the year just to calculate for the taxes.
Finally, you need to keep in mind that it is important to pay. There is no point evading this responsibility. It is unethical to veer away from the responsibility – that’s a fact. Also, the IRS is watching you. No matter what you do, you cannot escape from your responsibilities. Avoiding your taxes will only present many problems.

To write your own success story in the world of trading, you need to realize that forex trading is all about maximizing the opportunities that you encounter. You have to do everything you can to increase your profit margin. You have to take your time in filing your taxes correctly so as to avoid paying more due to penalties.