How Is Forex Trading Taxed
How would a Forex currency carry trade work?
How would this trade work? How would one enter into a trade correctly? Would the interest rate be the quoted one or the direct deposit one? How would one lose money on a forex carry trade? Do you know how to predict profit and loss scenarios to see how the trade may go? How would doing a currency trade between the dollar and the Brazilian real work? Would a country’s capital controls interfere with this trade. For example, I heard that several countries were imposing taxes on bonds, what would a forex investor have to look out for? Thank You
What is your recommended stop placements? How much leverage should I use? Thanks
That’s lots of questions and if I knew the exact answers to stop placements I would be very rich.
Until you have done forex for a while , you should use a low leverage. 20:1 would be the maximum.
Anything bigger and you are kicked out of trades at the slightest move against you.
In Forex, a carry trade is trade that borrows money from a low yielding currency and invests in a higher yielding currency which the intention of making money from the difference in interest rates.
So you would ‘sell’ a low yielding currency (usually the yen, or maybe the dollar right now) and buy a higher yielding one(like maybe the NZ dollar or Aussie Dollar),
Would the interest rate be the quoted one or the direct deposit one?
When I trade forex, the broker clearly posted the interest rates that were paid.
How would one lose money on a forex carry trade?
Ones loses money when the currencies go the opposite direction far enough for long enough to outweigh any money you’ll be making on the interest spread.
Do you know how to predict profit and loss scenarios to see how the trade may go?
No, If I did I would be super mega rich.
Would a country’s capital controls interfere with this trade. For example, I heard that several countries were imposing taxes on bonds, what would a forex investor have to look out for?
I haven’t found that a forex investor runs into that since you aren’t buying bonds directly. Check with your broker.
I would like to recommend Oanda.com as a great forex broker. They have tight fair spreads, reasonable leverage and good customer service.
Income Tax on Futures Income…MUST SEE! E-mini ES Futures Trading, Gold Euro Futures
