Currency Day trading & Tax Benefits. Interesting Info to Bear in Mind

Forex trading lets you profit from the financial markets no matter what happens to stock markets. Stock markets can go up and down but you can always profit from forex markets.Forex trading right now is being called the Recession Proof Business of the 21st Century. It is the best home based business. It is being said that many forex trading is going to make many millionaires in the coming decade.

Inflation or deflation, you can profit from forex trading. Interest rates can go up or it can go down, forex trading gives you the opportunity to profit in both instances unlike stock trading.

If you have always been fascinated with the financial markets and how they move than forex trading maybe for you. Markets are amazing. If you enjoy watching CNBC than forex trading is for you.The good thing is that forex is ideally suited for day trading. There are many ways to day trade. Have you ever done forex scalping?

If you have never opened a brokerage account, purchased stocks or invested in mutual funds than day trading is not for you. So you need prior investing experience to succeed with day trading.

Day trading can give you loss. If you can learn trading systems, strategies and money management principles than day trading is for you. Success in day trading depends on developing a good forex system.

If you are a decisive and a persistent personality in everyday life and you can afford to commit to your trading daily than day trading is for you.

You have to pay a capital gain tax for any investment in financial markets. Capital gains will be considered short term if it is less than one year. Short term capital gains are taxed at your current tax rate.

And the capital gains will be considered as a long term gain if the security is held for more than one year before you take profit. In case of long term capital gain, you will be taxed at a rate of 15% only. You see as a stock day trader, you are at a disadvantage.

But if you invest in forex markets, 60% of your profits will be taxed as long term capital gains and only 40% will be taxed as short term capital gains whether you hold a currency for one minute, one hour, and one month or more.

Let’s make it clear with an example. Suppose you make $10,000 investment in stocks and $10,000 investment in forex. Suppose your tax bracket is 33%. And lets suppose you made a profit of $10,000 in both stocks and forex each in six months.

Since your stock investment was less than six months, your profit will be treated as a short term capital gain. That means you will have to pay your current tax rate of 33% which will be (10,000)(0.33)=$3,300 and your profit after taxes will be only $10,000-$3,300= $6,700.

In case of forex, even though you took profit within six months, 60% of your profit will be treated as long term capital gain and 40% will be treated as short term capital gains. That means 60% of $10,000 will be taxed at only 15%. This is (0.6) (10,000) (0.15) =$900.

40% of your profits will be taxed as short term capital gains at your current tax rate of 33%. This is (0.4) (10,000) (0.33) = $1,320.

The total tax that you pay on forex investment will be $900+$1,320=$2,220. Compare this with $3,300 that you paid on stock investments.

The tax savings on forex investment like these can add up fast and accumulate into a sizable amount in your IRA or other tax deferred accounts.

Discover also the best way to manage your money! Visit this blog and find a lot of useful info about managed forex trading!