Tag: Forex Funding

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Beginners Forex Education Forex Basics

What You MUST Know About Bank Accounts for FX Trading

Forex traders often find themselves with the need for more features than what is offered with traditional bank accounts, such as the need to have access to multiple currency options. Finding a sufficient bank account can be a frustratingly difficult task for medium-sized investors, especially when it comes to tax optimization. However, if you choose […]

Forex traders often find themselves with the need for more features than what is offered with traditional bank accounts, such as the need to have access to multiple currency options. Finding a sufficient bank account can be a frustratingly difficult task for medium-sized investors, especially when it comes to tax optimization. However, if you choose […]

Forex traders often find themselves with the need for more features than what is offered with traditional bank accounts, such as the need to have access to multiple currency options. Finding a sufficient bank account can be a frustratingly difficult task for medium-sized investors, especially when it comes to tax optimization. However, if you choose to work with a bank in a non-CRS jurisdiction, your tax information won’t be reported immediately to the tax authorities in other countries.

You’ll also find several other benefits, including low opening deposits and tax credits and exemptions. This type of account is especially useful to beginners that are just getting started in the forex market and it can serve as a one-size-fits-all option for those that also invest in stocks, bonds, and other financial instruments. If you still aren’t convinced, allow us to give you five great reasons to open a forex-friendly bank account today:

Low Deposit and Account Balance Requirements

Most banks ask for a fairly high deposit, but forex-friendly accounts will typically allow you to get started with a deposit of just $2,500, which is generally much lower than what is required elsewhere. Minimum balance requirements are also set at a lower bar than what you would be required to keep with another type of account, so you don’t have to worry about topping up your balance as often. Altogether, these perks take away the stress for traders that want to avoid making a large deposit or who might dip into their account balance farther than expected.

Fees that are Both Low and Transparent

Banking fees are inevitable no matter where you go, but the real issue with many banks is transparency. If you don’t want to find any unexpected charges on your bank statement, a forex friendly account is the way to go. Many of these banks offer transparent pricing, along with fees that are usually lower than the competitor’s offer.  Trust us, transparency is key when it comes to anything dealing with brokers or banks. 

Beneficial Tax Policies

If you decide to open an account with one of our associates, you can look forward to tax exemptions that would lower your income tax rate to less than 10%. You’ll also benefit from the fact that they don’t work with jurisdictions that have dividends tax or national gains tax, and they only tax nationally sourced income because there is a territorial base for their tax rate.

Privacy

Most banks work with jurisdictions that are part of the CRS/AEOI, which require them to share exchange tax information with foreign tax authorities. Luckily, our associates don’t work with these jurisdictions, meaning that your privacy is protected and you can have the peace of mind that your assets and information are equally protected.     

An Account that Fits All Your Needs

Whether you’re only interested in trading forex or if you also dabble in precious metals, stocks, bonds, options, futures, and other financial instruments, a forex friendly account will give you access to everything you need with no need to open multiple accounts through different institutions. These multi-currency accounts are the most convenient option for traders that want efficient banking options. 

A Guide to Opening a Forex-Friendly Account

First, you’ll need to start by attempting to gain pre-approval from the bank. This doesn’t guarantee that you’ll be accepted, but it is the first step to the process and it improves your chances. You’ll need the following documents for pre-approval:

  • A bank form that has been filled out and signed
  • A (notarized) passport copy
  • A certified copy of your proof of residence
  • Six months’ worth of previous bank statements OR a banking reference

If the bank accepts your pre-approval, they will begin the process of reviewing your application, which typically takes around 20 days total with most banks. Don’t be alarmed if you’re asked to provide additional documents or forms during this time, as this is completely normal. You’ll also be expected to engage in a quick phone call with a banking representative to finalize the pre-approval process. Finally, if everything checks out, you’ll be all set to open your forex-friendly bank account.

Categories
Forex Basics

Forex or Bank Deposits: Which to Choose?

Deposits or Forex and stock trading: the choice depends on the trader’s predilection for risk, the desire to devote time to learning, the strategy, and the nature of the trader. Investors who preferred deposits could earn up to 2% in 2019. Gold could generate about 12.5%, stock market indices 14-19%, cryptocurrencies more than 100%. With […]

Deposits or Forex and stock trading: the choice depends on the trader’s predilection for risk, the desire to devote time to learning, the strategy, and the nature of the trader. Investors who preferred deposits could earn up to 2% in 2019. Gold could generate about 12.5%, stock market indices 14-19%, cryptocurrencies more than 100%. With […]

Deposits or Forex and stock trading: the choice depends on the trader’s predilection for risk, the desire to devote time to learning, the strategy, and the nature of the trader. Investors who preferred deposits could earn up to 2% in 2019. Gold could generate about 12.5%, stock market indices 14-19%, cryptocurrencies more than 100%. With such a return, deposits may seem less attractive assets, but this is only at first glance. What are the advantages and disadvantages of investing in deposits, on what depends on the choice between Forex, exchange houses, and banks, read more in our summary.

Forex, Currency Exchange, or Bank?

Those who invested money in cryptocurrencies in 2017 could earn more than 1000%. Since January, the main stock indices of the United States, Europe, and Asia have already generated more than 13% to investors and by the end of the year, there are still months and a half. In currency pair fluctuations it was possible to earn more than 100% annually, while under interest rates in the United States 2-4%, in Europe 0.5-1%, in Asia 3-7%. The choice between bureaux de change (OTC) and banks in terms of return on investment at first glance is obvious: banks barely cover the level of inflation. But not everything is so clear.

Deposits Vs. Trading

First, in general, I remember the fundamental difference between Forex and the stock market. The exchange is an intermediary, a platform on which you can buy both a currency and securities in physical or electronic form. The investor concludes the contract on paper or electronically with a broker who has access to the stock exchange platform, deposits money into the account, and starts trading. Investing money in assets through the stock exchange, the investor becomes its true owner.

Forex is an over-the-counter market involving traders, brokers, liquidity providers, and market makers. Here the trader also enters into a contract with the broker (or agrees with the offer) and through the trading platform invests in various assets: currency pairs, metals, commodities assets, cryptocurrencies. There are two working schemes for the trader and broker:

B-Book. A scheme in which the positions of the trader are covered within the broker (internal clearing).

A-Book. A scheme in which the broker acts only as an intermediary, bringing the trader’s operations to the global OTC market.

The providers of quotes are the same in both Forex and stock trading. But in Forex traders invest money in CFD (price difference contract), earning in the difference of the value of an asset. This is the main difference between Forex and the stock market. Both Forex and the stock exchange allow to win in the fluctuations of the exchange rates of the currencies, securities, and assets of raw materials. So, what will a potential investor choose: Forex and stock exchange trading or deposits?

Compare the performance of some 2017 instruments:

-Stock Indices. S&P 500 index grew by 14.39%, NASDAQ 19.6%, Nikkei 14.3%.

-Gold. In metal, it was possible to earn 12.5% per year. However, in March, May, and July the chart showed deep losses.

-Oil. “Black gold” rose by just 11%, but analysts are inclined that the controllers for solid growth are not yet given.

-Cryptocurrencies. In individual cryptocurrencies in 2017 investors could earn between 300-1000 and more percentage. The truth and volatility of cryptocurrency compared to other assets is enormous, in a day investors could lose up to 30% of their deposit. In addition, there are frequent cases of cyberattacks on electronic purses and problems of cryptocurrency exchange houses.

Deposits in national currency. According to deposits.org, the maximum rates of different countries in the world were: Russia 7.5%, India 7.45%, USA 4%, China 3.75%, Canada 2.75%, Italy 2%, Japan, and Germany 0.1%.

Compared to the stock market, deposits may appear more promising due to the relatively lower risk. But don’t forget that in deposits the investor earns a fixed sum, and in stock exchange or Forex, the investor can also make profits in short positions (in lowering the price of an asset).

Advantages of investing in deposits compared to the stock and OTC markets:

Reliability: Banks are closely controlled by a central bank because the probability of losing money is almost completely absent. In the extreme case, there are compensatory funds that will return all or part of the deposit. In Forex there are cases when it is necessary to resort to chargeback, and the so-called regulators do not take any action and report the bankruptcy of the broker after the fact.

No risk: In trading, the risk lies entirely with the investor. Although stock indices show relatively stable growth, for example in 2008 they showed weaknesses in stock markets. The example of January 2015 is also indicated when the Bank of Switzerland canceled the ceiling of the currency and the franc rose compared to the dollar by more than 30%. In one night, many traders’ deposits were set to zero.

Availability: The requirements of banks for a minimum deposit are very loyal, investments are available to all. To trade on US exchanges, you need several thousand US dollars, minimum deposits of European Forex brokers, from 100 USD, but even with such amount trading on Forex professionally is difficult due to the volatility of assets.

Facility: To make the deposit is sufficient 30 minutes, after which the investor only has to wait the end of its term. For successful trading on the stock exchange or Forex, you need to constantly follow the news, be able to apply technical analysis, etc., that is, devote a lot of time to learning and trading.

Diversification: Some banks offer gold deposits. The investor gains not only in interest but also in the price growth of the metal itself.

The disadvantages of bank deposits are twofold:

Low interest rates and the trend towards their subsequent decline. In the United States and Europe, the view is that money should work and not be a burden on bank accounts. The low-rate policy encourages investors to invest money in the stock market or business. In some countries, bank deposit rates do not even cover inflation.

The probability of entering the field of vision of the tax services. For the investor it is almost impossible to know about the existence of broker accounts, the bank accounts can be monitored. This situation could become a major obstacle for those who do not want to make the availability of money public.

Conclusion

Bank deposits are a type of investment for those who do not have time to understand the peculiarities of stock trading or currency pairs. For conservative investors, deposits are preferable, even if their return is 3-4 times lower than the return on stock or gold indices, but risks are almost excluded. For the most active traders and who are also available to dedicate time to learning and trading, earning on asset price fluctuations in both directions, it is better Forex or stock exchange. And, of course, we must not forget the diversification of risks: it is a good thing that at least 10% of the investment portfolio is a deposit.

Categories
Forex Risk Management

How Much Should You Risk on Each Forex Trade?

When it comes to forex trading, it’s a good idea to take advice from seasoned professionals so that we can avoid learning hard lessons for ourselves. One of the biggest lessons that these traders can teach us revolves around risk-management, which has to do with how much we risk on any single trade. For beginners, […]

When it comes to forex trading, it’s a good idea to take advice from seasoned professionals so that we can avoid learning hard lessons for ourselves. One of the biggest lessons that these traders can teach us revolves around risk-management, which has to do with how much we risk on any single trade. For beginners, […]

When it comes to forex trading, it’s a good idea to take advice from seasoned professionals so that we can avoid learning hard lessons for ourselves. One of the biggest lessons that these traders can teach us revolves around risk-management, which has to do with how much we risk on any single trade. For beginners, it might seem like risking more can pay off in the long run, because one large win could increase your investment significantly. Unfortunately, this way of thinking has lead to the end of many trader’s careers before they really even got started. If you risk 15% on one trade, 20% on another, and so on, you’re likely to blow through your account quickly. Its true that you might get lucky with a couple of trades, but it only takes one loss to wipe out all those winnings. 

The well-known trader Bill Lipschutz is a great example of how improper risk-management techniques can be devastating. This trader inherited $12,000 and turned it into $250,000 while in college. While this sounds like an inspiring story, the future millionaire blew his entire portfolio with one bad trade because he did not practice proper risk-management. Imagine building up that much only to lose it all on a single trade! Know that the story went on to have a positive ending despite this setback, as Bill did not give up and went on to open his own investment firm while being regarded as one of the top traders in the world. 

Still, we can always learn a lesson from other’s mistakes so that we don’t have to experience the same heartache. The trader in our example would have only lost a small portion of his portfolio if he had not risked as much. One of the most effective ways to limit your losses is to limit the amount you risk on any one trade. So, how much should you risk? Is the answer 2%, 5%, or higher?

Actually, experts recommend risking no more than 1% on any single trade. This may not seem like much, but it makes sense. For example, if you risk 1% on a $100 trade and lose, then you’ve only lost $1. This obviously won’t be a career ending move and you’ll barely notice the difference. If you were to risk 20% on the same trade, you’d lose $20 out of your $100 investment, leaving you with only $80. You’re far more likely to notice the difference in our second example. Once you apply this same principal on a larger scale, the difference is even more significant. Consider Bill Lipschutz from our above example. If he had only risked 1% on his trade, then he would have lost $2,500 out of $250,000. This might still seem like a large loss, but the smaller risk makes a huge difference. A trader could still walk away from this bad trade with most of their portfolio intact. 

If you take away anything from our article, you should know that managing risk is essential for successful trading results. It’s true that you might miss out on some opportunities, but you’ll have more profits in the end without suffering any career-ending blows. Just imagine how it would feel to lose everything in your account, whether its $100 or $100,000. We shouldn’t let the fear of losing cripple us, but we can take more control of what we can lose by only risking a small portion of our balance. Even if you don’t agree with out 1% recommendation, its always a good idea to keep your risk at a low percentage.