Leverage is a term that many Forex brokers use in order to attract new accounts. A high leverage ratio is quoted to many unsuspecting potential Forex traders who believe that a broker that offers the highest leverage will be the most reliable. This is not the case. There are many things that should be considered by the trader before he starts to trade Forex.
Here are the main things a trader must know:
– Leverage is a loan that is offered to a Forex trader by his forex broker so that higher value trades can be placed in the market place. This loan is offered in the form of a ratio and is based on the trading account that has been chosen, the amount of money that you choose to invest and the specific country that you are operating in. (Some countries mandate specific leverage limitations).
– The levels of leverage offered in Forex trading are far higher than the margins that are offered in the equity markets. This is because currency prices do not fluctuate as much as stock prices in a day and the change is about 1 percent at an average.
– Leverage can be obtained from the Forex brokers after opening a margin account with the broker. This allows for a Forex trade that is much larger and can produce larger profits.
– When a trade moves in the expected direction, the amount taken from the broker is returned to him once the trade is closed. On the other hand, if the trade ends in a loss, the trader may encounter higher levels of loss due to the leverage that has been used.
– Leverage is an option that Forex traders should use judiciously in order to ensure that they do not end up losing their life savings.. The size of the Forex market is so large that a small mistake can sometimes lead to huge losses.
– When deciding on the amount of leverage to use, risk tolerance should be kept in mind. This is the amount of money that you can lose without risking your lifestyle and family requirements.
– Last but not the least; leverage should be used as a tool to ensure higher levels of liquidity and not as a loan at all times. You should be extremely sure of the trade that you are making if you do avavail of leverage beyond your financial situation.
All in all, leverage is a great tool that every Forex trader has at his or her disposal. The trader must know how to use it correctly.

I hope the above currency trading information was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

In the world of binary option trading there are four major classes of assets. Stock, Commodities, Indices and Currencies. There is a small number of major currencies and a much larger number of minor currencies. In binary option trading, the worth of a currency is calculated by pairing it with another currency, and seeing what the trade value is. Here is an example of a binary option currency trade: A trader notices eleven o’clock AM that the EUR/USA is at 1.2410 .He believes that it will rise to 1.2473 at 12 o’clock PM. His next step would be to purchase a call option, and set his expiry time to one hour. If his prediction turns out to be correct, it results in payoff. There are many different currency pairs to choose from when purchasing an option. Some of the different currency pairs offered by Forex as a stock option are:

EUR/USD

EUR/GDP

EUR/JPY

EUR/CAD

EUR/CHF

USD/RUB

USD/CZK

USD/JPY

As with any asset in binary option trading, many factors can determine the outcome of a currency option. It is a good idea to get a basic understanding of Forex charts. There is usually a different chart for each currency pair. With a little practice, you’ll become a pro at evaluating Forex chart patterns and correlations. It is very important to set your expiry time correctly. You may also want to get an understanding of what abbreviations are used for the name and currency of each country. With this and a great risk management plan, you’ll have everything you need to be on your way to consistent payouts in no time. It is a good idea to start slow until you gain experience, and then build up from there.

The above information is opinion based except where noted. Always contact a licensed professional for information on the above subject or BEFORE applying or practicing the above information.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

While trading forex currency markets can be a confusing field to master, filing taxes in the U.S. for your profit/loss ratio can be just as confusing. Different IRS rules may apply depending on the method or methods you choose to trade forex currencies.

For Options and Futures Forex Trading Investors
Forex traders specializing in options and/or futures are grouped in what are known as IRC 1256 contracts. These IRS-sanctioned contracts mean traders get a lower 60/40 tax consideration. What this means is 60% of gains or losses are counted as long-term capital gains/losses and the remaining 40% as short term.

The benefits of this tax treatment are as follows:

1) Time: Many forex futures/options traders make several transactions per day. Of these trades, up to 60% can be counted as long-term capital gains/losses.
2) Tax Rate: When trading stocks (held less than one year), investors are taxed at the 35% short-term rate. When trading futures or options, investors are taxed at a 23% rate (calculated as 60% long-term times 15% max rate plus 40% short-term rate times 35% max rate).

For Over-the-Counter Forex Traders (OTC) Investors

Most spot traders are taxed according to IRC 988 contracts. These contracts are for foreign exchange transactions settled within two days, making them open to ordinary gains and losses as reported to the IRS. If you trade spot forex you will likely automatically be grouped in this category.

The benefits of this tax treatment are as follows:

1) Loss protection: If you experience net losses through your year-end trading, being categorized as a “988 trader” serves as a large benefit. As in the 1256 contract, you can count all of your losses as “ordinary losses” instead of just the first $3,000.

Comparing the Two Forex Trading IRS Taxing Rules

IRC 988 contracts are simpler than IRC 1256 contracts in that the tax rate remains constant for both gains and losses – an ideal situation for losses. 1256 contracts, while more complex, offer more savings for a trader with net gains – 12% more.

The most significant difference between the two is that of anticipated gains and losses.

Select Your Forex Trading Taxing Category Carefully

Now comes the tricky part: deciding how to file taxes for your situation. What makes foreign-exchange filing confusing is that while options/futures and OTC are grouped separately, you as the investor can pick either a 1256 or 988 contract. The tricky part is that you have to decide before January 1 of the trading year.

The two types of forex filings conflict but at most accounting firms you will be subject to 988 contracts if you are a spot trader and 1256 contracts if you are a futures trader. The key factor is talking with your accountant before investing. Once you begin trading you cannot switch from 988 to 1256 or vice versa.

Most traders will anticipate net gains (why else trade?) so they will want to elect out of their 988 status and in to 1256 status. To opt out of a 988 status you need to make an internal note in your books as well as file with your accountant.

This complication intensifies if you trade stocks as well as currencies. Equity transactions are taxed differently and you may not be able to elect 988 or 1256 contracts, depending on your status. (For another solution to tax issues, see Benefits Abound For Active Traders Who Incorporate.)

Keeping Track of Your Performance Forex Trading Record

Rather than rely on your brokerage statements, a more accurate and tax-friendly way of keeping track of profit/loss is through your performance record. This is an IRS-approved formula for record keeping:

* Subtract your beginning assets from your end assets (net)
* Subtract cash deposits (to your accounts) and add withdrawals (from your accounts)
* Subtract income from interest and add interest paid
* Add other trading expenses

The performance record formula will give you a more accurate depiction of your profit/loss ratio and will make year-end filing easier for you and your accountant.

When it comes to forex taxation there are a few things you will want to keep in mind, including:

1. Deadlines for filing: In most cases, you are required to elect a type of tax situation by January 1. If you are a new trader, you can make this decision before your first trade – whether this is in January 1 or December 31. It is also worth noting that you can change your status mid-year, but only with IRS approval.
2. Detailed record keeping: Keeping good records (and backups) can save you time when tax season approaches. This will give you more time to trade and less time to prepare taxes.
3. Importance of paying: Some traders try to “beat the system” and earn a full or part-time income trading forex without paying taxes. Since over-the-counter trading is not registered with the Commodities Futures Trading Commission (CFTC) some traders think they can get away with it. Not only is this unethical, but the IRS will catch up eventually and tax avoidance fees will trump any taxes you owed.

The Bottom Line
Trading forex is all about capitalizing on opportunities and increasing profit margins so a wise investor will do the same when it comes to taxes. Taking the time to file correctly can save you hundreds if not thousands in taxes, making it a transaction that’s well worth the time.

Read more…

I hope the above currency trading information was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

From TraderPlanet.com

Some questions I receive make me really ponder the reason for the question. A true case-in-point is the one below. I have to wonder why the reader wants to know anything about the Iraqi dinar. After all, we are talking about a country that is still to a degree in a civil war. We are talking about a country that is barely holding onto a governmental structure. We are talking about a country still rebuilding infrastructure destroyed from years of bombing and war. We are talking about a country sitting in the Middle East, a hotbed of unrest and civil disorder.

Will the Iraqi dinar have real value soon?

Okay, I have thought about this question and I can come up with only one reason the reader, or anyone outside of Iraq for that matter, actually cares about the dinar. Somebody is selling something that just ain’t gonna happen, and with just a couple of minutes on the Internet, I found the scam …

Advertisements in local newspapers promise great wealth by purchasing the new Iraqi dinar. Promoters explain that as democracy comes to Iraq, the expected peace will stimulate the Iraqi economy and the value of the dinar. What investors are not told is the dinars can be redeemed only in Iraq and that the sellers already have doubled their money. Thus, the dinar would have to more than double in value and you would have to take a trip to Iraq to collect any profit.

In the future, it is possible the world’s second largest oil producer could become stable and prosperous. The future, though, is a pretty big place, and there is a lot of time between then and now. So, my answer to the reader’s question is: the Iraqi dinar will not have any real value anytime soon.

Click here to go to Trader Planet

Anthony DiChi,
Your friend in Forex Currency Trading, FX Information and Forex News at TradeCurrencyNow

As posted on Yolohub.com

The future of the euro is hanging by a thread at the moment. The massive debt problems of nations such as Greece, Italy and Portugal are dragging down the rest of the Europe, and the political will in northern Europe to continue to bail out these debt-ridden countries is rapidly failing. Could the end of the euro actually be in sight? The euro was really a very interesting experiment. Never before had we seen a situation where monetary union was tried without political and fiscal union along with it on such a large scale. The euro worked fairly well for a while as long as everyone was paying their debts. But now Greece has collapsed financially, and several other countries in the eurozone (including Italy) are on the way. Right now the only thing holding back a complete financial disaster in Europe are the massive bailouts that the wealthier nations such as Germany have been financing. But now a wave of anti-bailout sentiment is sweeping Germany and the future of any European bailouts is in doubt. So what does that mean for the euro? It appears that there are two choices. Either we will see much deeper fiscal and political integration in Europe (which does not seem likely at this point), or we will see the end of the euro.

That status quo cannot last much longer. The citizens of wealthy nations such as Germany are becoming very resentful that gigantic piles of their money are being poured into financial black holes such as Greece. In fact, it is rapidly getting to the point where we could actually see rioting in the streets of German cities over all of this.

All of this instability is creating a tremendous amount of fear in world financial markets. Nobody is sure if Greece is going to default or not.

Without more bailout money, Greece will most certainly default. If anyone does not think that one domino cannot set off a massive chain reaction, just remember what happened back in 2008.

Bear Stearns and Lehman Brothers set off a chain reaction that was felt in every corner of the globe. All of a sudden credit markets froze up because nobody was sure who had significant exposure to bad mortgages.

Today, the entire world financial system runs on debt, so when there is a credit crunch it can have absolutely devastating economic consequences. The financial crisis of 2008 helped plunge the world into the greatest recession that the globe had seen since the 1930s.

In the old days, nations such as Greece that got into too much debt would just fire up the printing presses and cover over their problems with devalued currency.

Well, those nations that are using the euro simply cannot do that. The government of Greece cannot simply zap a whole bunch of euros into existence in order to solve their problems.

Right now, major European banks are holding massive amounts of debt from various European governments on their balance sheets. Most of these European banks are also very highly leveraged. Even a moderate drop in the value of those debt holdings could wipe out a number of these banks.

The head of the IMF, Christine Lagarde, recently told Der Spiegel the following….

“There has been a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken”

Unfortunately, what Lagarde said was right. You see, the financial system in Europe is a “confidence game” and a “crisis of confidence” is all that it would take to bring it down because it does not have a solid foundation.

Just like the U.S. financial system, the financial system in Europe is a mountain of debt, leverage and risk. If the winds start blowing the wrong direction, the entire thing could very easily come tumbling down.

Over the past couple of weeks, the outlook in Europe has become decidedly negative. For example, one senior IMF economist is now actually projecting that Greece will experience a “hard default” at some point in the coming months….

I expect a hard default definitely before March, maybe this year

If Greece defaults, that would mean that the bailouts have failed. That would also mean that several other nations in Europe would be in danger of defaulting soon as well.

The consequences of a wave of defaults in Europe would be absolutely staggering. As mentioned above, major banks in Europe are deeply exposed to sovereign debt.

Regarding this issue, Deutsche Bank Chief Executive Josef Ackermann recently made the following stunning admission….

“It’s stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”

Yes, you read that correctly.

There are quite a few major European banks that are in imminent danger of collapse.

Even though there hasn’t been any sovereign defaults yet, we are already starting to see massive financial devastation in Europe. Just check out some of the financial carnage from Monday….

*The stock market in Germany was down more than 5%.

*The stock markets in France and Italy were down more than 4%.

*Royal Bank of Scotland was down more than 12%.

*Deutsche Bank was down more than 6%.

*Societe Generale was down more than 8%.

*Italy’s UniCredit was down more than 7%.

*Barclays was down more than 6%

*Credit Suisse was down more than 4%.

*The yield on 2 year Greek bonds was up to 50.38%.

*The yield on 1 year Greek bonds was up to 82.14%. A year ago it was under 10%.

Just like in 2008, banking stocks are leading the decline. We have another major financial crisis on our hands and there is no solution in sight.

As the financial world becomes increasingly unstable, investors are flocking to gold. In case you have not noticed, gold is up over $1900 an ounce again.

So what comes next?
Click here to go to Yolo to view more of this story….

Anthony DiChi,
Your friend in Forex Currency Trading, FX Information and Forex News at TradeCurrencyNow

Currency futures are futures contracts where the underlying commodity is a currency exchange rate. These contracts offer investors the ability to enter the foreign exchange market in an environment that is similar to other futures contracts. Currency futures, also called forex futures or foreign exchange futures, are exchange-traded futures contracts to buy or sell a specified amount of a particular currency at a set price and date in the future. Like other futures products, currency futures are traded in terms of contract months with maturity dates falling in March (H), June (M), September (U) and December (Z).

Popular currency futures contracts include:
– AUD/USD Futures (Australian dollar/US dollar)
– CAD/USD Futures (Canadian dollar/US dollar)
– EUR/USD Futures (Euro/US dollar)
– GBP/USD Futures (British pound/US dollar)
– CHF/USD Futures (Swiss franc/US dollar)
– EUR/GBP Futures (Euro/British pound)
– EUR/CHF Futures (Euro/Swiss franc)
– EUR/JPY Futures (Euro/Japanese yen)
– JPY/USD Futures (Japanese yen/US dollar)
– NZD/USD Futures (New Zealand dollar/US dollar)

An advantage in trading the currency futures markets is that they are regulated the same way as other futures markets. They have a great deal more oversight than the spot forex market which is largely unregulated. Currency futures brokers must follow regulations enforced by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA).

The above article is written in part by author Jean Folger who writes at http://financialedge.investopedia.com .

Anthony DiChi,
Your friend in Forex Currency Trading, FX Information and Forex News at TradeCurrencyNow

Exchange traded funds, commonly referred to as ETFs, are investment funds that are traded on a stock exchange. Investors have a wide variety of ETFs from which to choose including those that track a major market Index, target gold or track a basket of foreign currencies. Currency ETFs provide investors with exposure to a particular currency or a basket of currencies, allowing access to multiple foreign currencies.

In 2005, Rydex SGI launched CurrencyShares Euro Trust (NYSE:FXE), the first currency exchange-traded fund. Since then, there has been significant growth in the entire currency ETF market, with assets of all funds now totaling more than $6 billion. Approximately 40 funds are now available that offer investors currency exposure.

The largest of the currency ETFs is the PowerShares DB U.S. Dollar Index Bullish (NYSE:UUP) with $1.05 billion in net assets. Incidentally, an advantage in trading ETFs is that they can be shorted, so investors could actually short the bullish fund if they felt the dollar was headed down. The fund invests by going long USDX futures contracts (to replicate the performance of being long the U.S. dollar against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc).

The above article is written in part by author Jean Folger who writes at http://financialedge.investopedia.com .

Anthony DiChi,
Your friend in Forex Currency Trading, FX Information and Forex News at TradeCurrencyNow