Trade with Stop and Limits with US-based Forex Brokers

Due to new Compliance Rule 2-43(b), starting from 31 July 2009, traders with US-based forex brokers will be able to use entry orders to place stops and limits. Entry orders help to minimize the losses and provide the ability to profit. 

 In order to use entry orders for stop-loss and limits: 

For Buy Positions

Placing an entry order to sell below the price where you got into the position protects you from additional losses. Placing an entry order to sell above the price where you got in locks in profits.

For example, if you have a BUY EUR/USD position at 1.3900, you could place:

a stop-loss using a sell entry order (Stop Entry, SE) at 1.3800

 

or

 

a limit using a sell entry order (Limit Entry, LE) at 1.4000.

For Sell Positions

Placing an entry order to buy above the price where you got in protects you from additional losses. Placing an entry order to buy below the price where you got in locks in profits.

For example, if you have a SELL EUR/USD position at 1.3900, you could place:

a stop-loss by using a buy entry order (Stop Entry, SE) at 1.4000

 

or

 

a limit using a buy entry order (Limit Entry, LE) at 1.3800.

The National Futures Association (NFA), our industry’s self regulatory organization in the United States, has informed all Forex Dealer Members, which includes FXCM forex broker , that it has adopted new Compliance Rule 2-43(b) regarding forex trading. Read Compliance Rule 2-43(b)

FXCM Broker Offers New Risk Management Option

The new Compliance Rules 2-43(b) states that forex traders will no longer have the ability to place stop-loss or limit orders. Forex traders will no longer be able to modify or close trades from the ‘Open Positions” window. Hence, any existing stop-loss and limit orders will be removed from FXCM broker accounts after July 31.

 

In order to offer an alternative risk management to traders, FXCM has introduced a new feature called OCO (One Cancels the Other) entry orders, which will provide traders with the same functionality as stop and limit orders except that they are not linked to any position.

Visit FXCM for more information

New Forex Compliance Rule 2-43(b) from NFA

National Futures Association (NFA), forex industry self regulatory organization in United States, announced that it is now following the new Compliance Rule 2-43 regarding forex trading.

• This rule requires that orders be executed First In, First Out (FIFO). FIFO requires that when multiple positions are held in the same currency pair, the position which was first opened will be the first to be closed. Stop loss and limit orders do not comply with FIFO.
• The NFA’s stance is that FIFO provides more transparency to customers, offering a more accurate picture of the P/L than viewing the results of individual positions. This brings the forex market more in line with the practices of the futures and equities markets.

What impact does the new rule have on traders?

Traders who trade via forex brokers regulated by NFA will no longer be able to place stop-loss or limit orders. The ability to modify or close trades from “Open Positions” window is also no longer available. This major new rule will go into effect after July 31, 2009.

Read Compliance Rule 2-43(b)

Start Forex Trading – Advices and Tips for Beginners

Forex trading is a difficult profession. It takes a lot of time, patience, practice and learning. There are plenty of obstacles and many beginners simply give up. Those who don’t surrender that easily search for tips and tricks to avoid or at least minimize the pitfalls. What kind of advices can help beginners in forex?
 Find how to start forex trading here

How to Start Forex Trading – Forex Guide for Beginners

The popularity of forex trading is rising with more and more people joining the elite option of working from home. As a beginner, however, you might find it difficult to start trading and become frustrated and discouraged by pitfalls and hidden touches. What is the right way to start trading and what are the steps towards becoming successful in forex?

Read full article about how to start forex trading here

New NFA Compliance Rule For Forex Orders

NFA Commodity Futures Trading Commission has passed the new NFA Compliance Rules 2-43 regarding forex orders. Forex traders will no longer be able to carry offsetting transactions for any positions opened after May 15, 2009.

For more information, click here

15 Most Common Forex Trading Mistakes

 

Starting forex trading career is an exciting journey. The mind-blowing financial challenges, economic riddles, potential sky rocking profits and psychological effects – all assembled together in one profession. As a new forex trader you need to recognize the universal mistakes which can easily turn your forex trading adventure into unnecessary, costly ride. What are the common mistakes traders make and how can you avoid making them?

 

Find out what are common forex trading mistakes here

Chasing Two Rabbits – Full Time Job and Forex Trading

I am not going to lie to you – having a full-time job demolishes the ability to trade forex properly. Even if you have an access to computer all day in your office, trading currencies during work hours seems practically impossible and unworthy. Why is it impossible to just bring up the charts every hour, spend couple of minutes looking at potential setups and go back to your usual daily tasks? What are the real risks involved in this scenario? What are the alternatives?

 

Read full article about forex trading part time here

Pay Taxes for Forex Trading – US Traders

You finally start to profit and you are all excited about your just withdrawn cash when it suddenly hits you – what about taxes? How are my profits taxed and where should you report your income? What kind of documents should you fill in and how to keep IRC away from knocking on your door in the middle of a happy sunny day?!

 I don’t know about other countries (I promise to investigate though!), but US traders are definitely required to pay taxes for foreign exchange profits. It sucks, but that’s the law, so unless you are planning to move to Europe or Middle East, you should continue reading!

US forex traders can choose to be taxed under the tax rules of regular commodities (IRC Section 1256 contracts). Another options is to be taxed under the special rules (IRC Section 988 – Treatment of Certain Foreign Currency Transactions)

 

Good thing about Section 1256 for forex traders is that when you report your capital gains on IRS Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles) you have the right to split your capital gains on Schedule D using a 60% / 40% split. What the hell is this split??

•  60% of the capital gains are taxed at the lower capital gains rate (currently 15%)
• the remaining 40% at the ordinary capital gains rate (as high as 35%).

What about Section 988? What is it and how to deal with it? Read about it here: http://www.forexexplore.com/blog/viewpost/319.html