Set A Forex Trading Schedule that Will Give You Peace of Mind

Many first-time forex traders hit the market running. They watch variouseconomic calendars and trade voraciously on every release of data, viewing the 24-hours-a-day, five-days-a-week foreign exchange market as a convenient way to trade all day long. Not only can this strategy deplete a trader's reserves quickly, but it can burn out even the most persistent trader. Unlike Wall Street, which runs on normal business hours, the forex market runs on the normal business hours of four different parts of the world and their respective time zones, which means the trading day lasts all day and night.

So what's the alternative to staying up all night long? If traders can gain an understanding of the market hours and set appropriate goals, they will have a much stronger chance at realizing profits within a workable schedule.

Know the Markets
Currency trading is unique because of its hours of operation. The week begins at 6pm EST on Sunday and runs until 4pm on Friday.

But not all hours of the day are equally good for trading. The best time to trade is when the market is most active. When more than one of the four markets are open simultaneously, there will be a heightened trading atmosphere, which means there will be greater fluctuation in currency pairs. When only one market is open, currency pairs tend to get locked in a tight pip spread of roughly 30 pips of movement. Two markets open at once can easily see movement north of 70 pips, particularly when big news is released. 

First, here is a brief overview of the four markets (hours in EST):

• New York (open 8am to 5pm): According to "Day Trading the Currency Markets" (2005) by Kathy Lien, New York is the second largest forex platform in the world and is watched heavily by foreign investors because the U.S. dollar is involved in 90% of all trades. Movements in the New York Stock Exchange (NYSE) can have an immediate and powerful effect on the dollar. When companies merge and acquisitions are finalized, the dollar can gain or lose value instantly. 
• Tokyo (open 7pm to 4am): Tokyo takes in the largest bulk of Asian trading, just ahead of Hong Kong and Singapore. It was the first Asian trading center to open. The best currency pairs to aim for (for traders looking for a lot of action) are USD/JPY, GBP/CHF and GBP/JPY. The USD/JPY is an especially good pair to watch when the Tokyo market is the only market open because of the heavy influence the Bank of Japan has over the market. 
• Sydney (open 5pm to 2am): Sydney is where the trading day officially begins, and while it is the smallest of the mega-markets, it sees a lot of initial action when the markets reopen on Sunday afternoon because individual traders and financial institutions try to stabilize after all the action that may have happened since Friday afternoon.
• London (open 3am to noon): The United Kingdom dominates the currency markets worldwide, and London is its main component. London, known as the trading capital of the world, accounts for roughly 34% of global trading, according to a report by IFSLondon. The city also has a big impact on currency fluctuations because the Bank of England, which sets interest rates and controls the monetary policy of the GBP, has set up shop in London. Forex trends often originate in London as well, which is a great thing for technical traders to keep in mind. 

Overlaps in Trading
As stated earlier, the best time to trade is when there is an overlap in trading times between open markets. Overlaps equal higher price ranges, resulting in greater opportunities. Here is a closer look at the three overlaps that happen each day:

• U.S./London (8am to noon): The heaviest overlap within the markets occurs in the U.S./London markets. According to Kathy Lien, more than 70% of all trades happen when these markets overlap because the U.S. dollar and the euro are the two most popular currencies to trade. If a trader is looking for the most optimal time to trade (when volatility is high), than this would be the ideal time.
• Sydney/Tokyo (2am to 4am): This time period is not as volatile as the U.S./London overlap, but it still offers a chance to trade in a period of higher pip fluctuation. The ideal currency pair to aim for in this period is the EUR/JPY pair, as these are the two main currencies influenced.
• London/Tokyo (3am to 4am): This overlap sees the least amount of action of the three overlaps because of the time (most U.S.-based traders won't be awake at this time), and the one-hour overlap gives little opportunity to watch large pip changes occur.

News Releases
While understanding the markets and their overlaps can aid a trader in arranging his or her trading schedule, there is one influence that should not be forgotten: the news release.
A big news release has the power to enhance a normally slow trading period. When a major announcement is made regardingeconomic data - especially when it goes against the predicted forecast - currency can lose or gain value within a matter of seconds.

However, just because dozens of economic releases happen each weekday in all time zones and seemingly affect all currencies, it does not mean a trader needs to be aware of all of them. It is important to prioritize these releases so that the important ones are watched and the lesser ones are simply monitored for surprises. Some of the bigger news releases to watch for include:

• Interest rate decisions
• CPI data
• trade deficits
• Consumer consumption
• Central bank meetings
• Consumer confidence
• GDP data
• Unemployment rates
• retail trade

The Bottom Line
When setting up a trading schedule, it is important to run a strong balance between market overlaps and news releases. Traders looking to enhance profits should aim to trade during more volatile times, while keeping an eye on what economic data is released when. This balance allows part-time and full-time traders the opportunity to set a schedule that gives them peace of mind, knowing that opportunities are not slipping away when they take their eyes off the markets.

Source: http://www.investopedia.com/

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Top 4 Pros and Cons of Refinancing Before You Retire

When the clock is ticking down to your retirement date, your focus should be on getting your financial ducks in a row. And if cutting back on expenses is a priority, a refinance may be one of the moves you’re considering. Refinancing may makes sense if you’re trying to snag a lower interest rate or reduce your monthly payments, but like anything else, timing is everything. If you’ve only got a few years left until you hit your golden years, you’ll want to weigh the pros and cons carefully before pulling the trigger.

Pro #1: You’ll Have More Wiggle Room in Your Budget

Lowering your overhead costs may be a necessity if you expect your income to take a dip once you retire. If refinancing means a substantial reduction in your payments, it can make a serious difference in your monthly cash flow. Going ahead with the refinance before reaching the point where you actually need that extra breathing space gives you more money to bulk up your emergency savings or max out your retirement accounts.

Con #1: Refinancing Isn’t Free

When you refinance, you’re taking out a new loan, which means you’ll be on the hook for paying the closing costs all over again. Closing costs typically add up to anywhere from two to five percent of the loan value, so if you still owe quite a bit on your first mortgage, you could find yourself shelling out several thousand dollars to seal the deal. Depending on how much you have to pay, it may take anywhere from three to seven years to recoup the expense, negating some of your savings in the process.

Pro #2: You Can Streamline Your Mortgage Repayment

If you’ve taken out a home equity loan in addition to your original mortgage, refinancing allows you to combine the two into a single payment, which may be a more affordable option than paying them separately. In situations where your home equity loan or line of credit is tied to a variable rate, refinancing also gives you the opportunity to lock in a low fixed rate. This gives you the stability of knowing what your payment will be each month.

Con #2: The Loan Repayment Period May Be Extended

One of the issues you’ll have to decide when refinancing is what type of mortgage term to go with. The shorter the term, the higher the payment, but you’ll be paying your home off at a much faster pace. If you’ve got 10 or 15 years left on your current mortgage and refinance to a 30-year term, your payments will likely end up being much lower, but you’ll be faced with the prospect of owing money on the home well into your retirement.

Pro #3: You Can Cash out Your Equity

Aside from the potential savings involved, refinancing is also a popular choice for homeowners who want to tap into their equity. Once you get your hands on the cash, you can use it to pay off any high-interest debt (such as from credit cards) that’s still lingering, or tackle those home improvement projects you’ve been putting off. Getting rid of debt puts you in a prime position to pare down your budget once you retire, and upgrading the property can help you out if you eventually decide to sell.

Con #3: Taking out Your Equity Isn’t a Magic Bullet

Pulling equity out of your home to pay off burdensome credit card debt doesn’t make sense if you don’t have your spending under control. Unless you’re actively planning out your budget, tracking your purchases and setting goals, you could end up running up the balances all over again. When the time comes to leave the 9 to 5 behind for good, you may be no better off than you were before you refinanced.

Pro #4: You’ll Still Get a Tax Break

Currently, homeowners are able to deduct the interest they pay towards their mortgage each year. When you refinance into a longer mortgage term, you’re also extending the amount of time you’re able to claim the deduction. If you’re worried about your tax bracket increasing once you start drawing on your retirement income, it pays to take advantage of every possible write-off.

Con #4: There May Be a Penalty

Before you move ahead with a refinance, you’ll want to review your existing mortgage terms carefully to see if there’s a prepayment penalty. Generally, prepayment penalties range from two to four percent of the loan, and not all lenders charge them. If you’re having to pony up a penalty on top of the closing costs, you’re diminishing any potential savings from the refinance even further.

Refinancing definitely has its advantages, but you have to be aware of what the potential downsides are going forward. Moreover, you need to avoid some of the common refinancing mistakes inherent in the process. Taking a look at the bigger retirement picture can help you decide where a refinance fits in.

[Source:smartasset.com]Sourse: Thefinancebucks.com

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3 Timeless Financial Principles to Follow

There is a lot of advice out there on personal finance.

And a lot of the advice that you’ll find is conflicting. It seems everybody has an opinion about something, and with the world ever changing, there are a lot of things that seem to stop being relevant.

Despite that, however, there are a few pieces of financial advice that will never stop being relevant and correct.

Here they are:

Spend Less than You Earn

No matter what changes economically or what the government does, or where interest rates go, the idea of spending less than you earn is always going to be relevant.

After all, how else will you get ahead? Spending less than you earn will keep you out of debt and help you save money.

Save Some for Later

It’s easy to become short sighted with money. There are so many things putting strain on our immediate budgets that it’s difficult to think about later on.

However, saving some money for later will always be good advice. We never know what will happen later and we also never know how long we’ll live. The last thing we need is to be stuck in a sticky situation when we need to retire with no money.

So you should always save some for later – whether it’s in an emergency fund, retirement account, or both (ideally).

Avoid Consumer Debt

There will always be a lot of argument around debt. Some people don’t believe mortgage debt is bad, some people believe student loans are the best way to pay for college, but we can all agree that consumer debt is mindless and should be avoided at all costs.

This will be a principle for as long as there are creditors on the planet.

Don’t get lost in the noise of different people telling you different things. Remember these three things and always stick with them!

[Source:minimalist-finance.com]Sourse: Thefinancebucks.com

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The Facts You Should Know about Trade Execution

When you place an order to buy or sell stock, you might not think about where or how your broker will execute the trade. But where and how your order is executed can impact the overall costs of the transaction, including the price you pay for the stock. Here's what you should know about trade execution:

Trade Execution Isn't Instantaneous

Many investors who trade through online brokerage accounts assume they have a direct connection to the securities markets. But they don't. When you push that enter key, your order is sent over the Internet to your broker-who in turn decides which market to send it to for execution. A similar process occurs when you call your broker to place a trade.

While trade execution is usually seamless and quick, it does take time. And prices can change quickly, especially in fast-moving markets. Because price quotes are only for a specific number of shares, investors may not always receive the price they saw on their screen or the price their broker quoted over the phone. By the time your order reaches the market, the price of the stock could be slightly - or very - different.

No SEC regulations require a trade to be executed within a set period of time. But if firms advertise their speed of execution, they must not exaggerate or fail to tell investors about the possibility of significant delays.

Your Broker Has Options for Executing Your Trade

Just as you have a choice of brokers, your broker generally has a choice of markets to execute your trade:

• For a stock that is listed on an exchange, such as the New York Stock Exchange (NYSE), your broker may direct the order to that exchange, to another exchange (such as a regional exchange), or to a firm called a "third market maker." A "third market maker" is a firm that stands ready to buy or sell a stock listed on an exchange at publicly quoted prices. As a way to attract orders from brokers, some regional exchanges or third market makers will pay your broker for routing your order to that exchange or market maker-perhaps a penny or more per share for your order. This is called "payment for order flow."
• For a stock that trades in an over-the-counter (OTC) market, such as the Nasdaq, your broker may send the order to a "Nasdaq market maker" in the stock. Many Nasdaq market makers also pay brokers for order flow.
• Your broker may route your order - especially a "limit order" - to an electronic communications network (ECN) that automatically matches buy and sell orders at specified prices. A "limit order" is an order to buy or sell a stock at a specific price.
• Your broker may decide to send your order to another division of your broker's firm to be filled out of the firm's own inventory. This is called "internalization".  In this way, your broker's firm may make money on the "spread" - which is the difference between the purchase price and the sale price.

The graphic below shows your broker's options for executing your trade:

Your Broker Has a Duty of "Best Execution"

Many firms use automated systems to handle the orders they receive from their customers. In deciding how to execute orders, your broker has a duty to seek the best execution that is reasonably available for its customers' orders. That means your broker must evaluate the orders it receives from all customers in the aggregate and periodically assess which competing markets, market makers, or ECNs offer the most favorable terms of execution.

The opportunity for "price improvement" - which is the opportunity, but not the guarantee, for an order to be executed at a better price than what is currently quoted publicly - is an important factor a broker should consider in executing its customers' orders. Other factors include the speed and the likelihood of execution.

Here's an example of how price improvement can work: Let's say you enter a market order to sell 500 shares of a stock. The current quote is $20. Your broker may be able to send your order to a market or a market maker where your order would have the possibility of getting a price better than $20. If your order is executed at $20 1/16, you would receive $10,031.25 for the sale of your stock - $31.25 more than if your broker had only been able to get the current quote for you.

Of course, the additional time it takes some markets to execute orders may result in your getting a worse price than the current quote - especially in a fast-moving market. So, your broker is required to consider whether there is a trade-off between providing its customers' orders with the possibility - but not the guarantee - of better prices and the extra time it may take to do so.

You Have Options for Directing Trades

If for any reason you want to direct your trade to a particular exchange, market maker, or ECN, you may be able to call your broker and ask him or her to do this. But some brokers may charge for that service. Some brokers now offer active traders the ability to direct orders in Nasdaq stocks to the market maker or ECN of their choice.

In a recent speech, SEC Chairman Arthur Levitt emphasized that investors have the right to know where and how their firms execute their orders and what steps they take to assure best execution.

Ask your broker about the firm's policies on payment for order flow, internalization, or other routing practices - or look for that information in your new account agreement. You can also write to your broker to find out the nature and source of any payment for order flow it may have received for a particular order.

If you're comparing firms, ask each how often it gets price improvement on customers' orders. And then consider that information in deciding with which firm you will do business.

Source: eagletraders.com

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5 Insurance Issues for Entrepreneurs

One of the items that many entrepreneurs overlook when they get started is insurance. When you’re starting a business, it doesn’t seem important to worry overmuch about insurance. In fact, it might not even be on your radar. However, it’s important to be aware of some of the realities of insurance as an entrepreneur. Here are 5 insurance issues to watch out for:

1. Business Use of Your Home

We know that homeowners insurance is necessary if you want to protect what is likely your biggest asset. However, some homeowners policies don’t cover the business use of your home. If your homeowners policy does cover business use, your coverage might be capped at a rather low amount.

If you’re running your business out of your home (at least to start), you need to be aware of what’s really covered. Double-check your homeowners policy to make sure that your home office, and the business activities that take place in your home are properly covered by insurance. You might need to purchase additional coverage if your standard homeowners policy doesn’t do the job.

2. Health Coverage (Especially in the U.S.)

In the United States, health coverage is a big deal. Once you strike out on your own, you could find yourself without health insurance coverage. As an entrepreneur, you need to make sure that you aren’t putting your fledgling business at risk with big medical bills. While health insurance doesn’t completely protect against high bills, it can reduce some of the impact. However, since you are self-employed and not working for “the man,” you don’t have health benefits in the United States. You need to cover that lack on your own. The cost of health insurance is tax-deductible for entrepreneurs in the United States.

Even in Canada, you might still need private insurance, depending on your health care needs. Investigate your needs for health care, and make sure that you have the appropriate coverage, no matter where you live.

3. Liability Coverage

Depending on the nature of your business, liability coverage might be necessary. This includes the ability to cover costs if someone is injured on your business property, or in the course of your business operations. However, liability coverage isn’t just about physical injuries. Some professional entrepreneurs need to protect themselves from lawsuits. Doctors, financial planners, lawyers, and others find that liability coverage is important. There are many different types of liability coverage that can help you manage your reputation and protect your business. Consider protecting your business assets with liability coverage.

4. Vehicle Coverage

Some entrepreneurs have need of vehicles for their businesses. If you use cars, trucks, vans, or other vehicles as part of your business, you need to make sure that they are properly covered. Just as you might not be able to rely on your standard homeowners policy to cover business use, you might not be able to rely on your standard auto policy to cover activities related to your business.

Find out what needs to be done in order to ensure that your vehicles are properly covered. In many cases, it’s better to designate specific vehicles for business use so that you don’t mix business and personal. However, if that isn’t an option, speak to your insurance agent about possibilities. You need to make sure that your vehicles are properly covered. This also includes coverage for employees who might be driving your business vehicles. All of your drivers should be properly covered before you let them drive.

5. Life Insurance

Finally, make sure that you have adequate life insurance. You can get great rates if you opt to use online life insurance quotes. Many entrepreneurs don’t even think about life coverage. However, this is the coverage that matters to your family. If something happens to you, what will your family do financially? As your business expands, you need to double-check your coverage amount as well. Too many entrepreneurs start with a small amount of coverage, and then forget to increase the amount that they have later. The result is often that they don’t have coverage that reflects the growing financial success of the company. Remember that your family relies on you for their financial well-being. If something happens to you, they may not be able to manage. As your business grows, consider how much life insurance you need, and remember to update coverage as needed.

[Source:prairieecothrifter.com]Sourse: Thefinancebucks.com

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How a Professional Trader Can Save Big At Tax Time

Trader tax laws and benefits are complex and nuanced. Far too many traders and tax preparers don’t know the laws or misapply them on tax returns. Why pay tens of thousands of tax dollars more than you should?

It’s wise to educate yourself before risking your capital and it’s wise to do the same before planning and filing tax returns. To help with the latter, I’ve assembled a list of the most common mistakes made by traders and tax preparers.

Big picture items

1. Not claiming trader tax status, business expense treatment. (Or claiming this status when not entitled to it.) Business traders can save an average of $5,000 or more using business expense treatment. Business expenses are 100% deductible from gross income, whereas investment expenses are considered miscellaneous itemized deductions and are only deductible “below the line” in excess of 2% of adjusted gross income (AGI) and added back for the Alternative Minimum Tax (AMT), also known as the nasty second tax regime. Business expenses allow home-office deductions, education expenses, and startup costs, whereas investment expenses do not. Also, traders may claim trader tax status after the fact, including on amended tax return filings for the past three open tax years.

2. Not filing the Section 475 MTM ordinary loss election on securities and getting stuck with the puny $3,000 capital loss limitation, wash sale loss headaches, and extra tax costs. Many traders and accountants mishandle the Section 475 election statement (due by April 15 of the current tax year for existing individuals and partnerships) or they botch perfecting the election on a Form 3115 filing. One mix up can jeopardize ordinary gain or loss treatment. The biggest pitfall for traders is not deducting trading losses when they otherwise could. Section 475 does not apply to segregated investments or Section 1256 contracts when elected on securities only.

Unfortunately, you can’t fix a missed or botched Section 475 election; you need to focus on climbing out of the capital loss carryover hole you dug. You can form a new entity and use the “new taxpayer” exception allowing an internal Section 475 election within 75 days of inception.

3. Making the wrong decision about the forex Section 988 opt-out election and reporting forex incorrectly. Spot and forward forex receives Section 988 ordinary gain or loss treatment (which generally is better than a capital loss limitation). At any time during the tax year, traders are entitled to file an internal “contemporaneous” opt-out election to have capital gains treatment instead. That’s helpful if you have capital loss carryovers. If you trade in major forex currencies and don’t “take or make delivery” of the underlying currency, the opt-out election subjects forex forwards — and we make a case for spot forex too — to the lower Section 1256(g) 60/40 tax rates. That reduces the highest tax rates by 12%!

Forex reporting depends on whether you file the Section 988 opt-out election and whether you qualify for trader tax status. Section 988 without trader tax status is line 21 of Form 1040, and with that status its Form 4797 Part II. Section 988 losses over $50,000 require “tax shelter” Form 8886. Many IRS agents are confused over tax treatment for spot forex, plus forex brokers aren’t supposed to issue 1099-Bs for spot forex. Make sure to read brokers’ tax reports correctly. For example, rollover interest is part of trading gain or loss. If you opt-out of Section 988 and choose Section 1256(g), use mark-to-market at year-end on Form 6781. Thankfully, summary reporting applies on forex.

4. Business traders not forming a trading entity to unlock AGI deductions for retirement plans and health insurance premiums. These AGI deductions can save $2,000 to $17,000 or more in taxes, but sole proprietor retail traders can’t get them in connection with trading gains. By forming a simple pass-through entity like a partnership, LLC, or S-Corp, business traders can take advantage of these deductions.

Tax reporting errors and compliance headaches

5. Reporting trading gains and losses on Schedule C, almost guaranteeing an IRS notice or exam. Items must be reported in the correct place. While business expenses are reported on Schedule C, trading gains and losses are reported on other tax forms like 8949, 6781, and 4797.

6. Using our transfer-of-income strategy incorrectly, or not using it at all. The transfer is executed differently for sole proprietors vs. entities. You need this transfer to unlock the home-office deduction, Section 179 depreciation, and AGI deductions, and to reduce the IRS red flag factors on Schedule C and entities.

7. Using the wrong solution for securities trade accounting and calculating gains and losses incorrectly, especially wash sales. Many traders and preparers botch IRS cost-basis reporting on Form 8949 and the reconciliation with Form 1099-B. Some traders fail to report non-1099-B items like stock options on Form 8949. We recommend TradeLog software to handle this after downloading actual trades, rather than inputting 1099-B information.

8. Botching tax treatment between securities, Section 1256 contracts, forex, ETFs, options, precious metals, foreign futures, and more.

9. Misreporting Section 1256 contracts such as securities on Form 8949 rather than on Form 6781, thereby losing lower 60/40 treatment. Not all brokers report Section 1256 contracts correctly, especially instruments that aren’t clearly designated as such including some E-mini indexes and options on those indexes.

10. Misreporting ETFs and ETF options and not adding Schedule K-1 pass-through income to cost basis. ETFs and ETF options are generally taxed as securities, and commodity ETFs often pass through Section 1256 income or loss on a K-1. Options on commodity ETFs can be considered Section 1256 contracts. It’s a pain to deal with numerous ETF K-1s at tax time.

11. Not filing a 1099-Misc for fees paid to service providers, including you for administration. Sole proprietors or entities paying service providers $600 or more by check or cash must issue a Form 1099-Misc. It’s better to file a 1099-Misc. late subject to a penalty of $50 rather than encourage the IRS to catch you and assess much higher penalties.

12. Misreporting education expenses. Pre-business education expenses — including seminars, trade shows, and travel — are generally not allowed as investment expenses. Education is allowed as a business expense but only if incurred after qualifying for trader tax status. Try to squeeze a reasonable amount of pre-business education into Section 195 startup costs to expense once you achieve trader tax status. Don’t fall prey to those promising better results using dual entity schemes including a C-Corp.

13. Not filing a tax return due to negative income and trading losses. Expect a “jeopardy” (made up) tax assessment notice from the IRS. If you trade securities, the IRS doesn’t see the full picture, even with new cost-basis reporting. The IRS may think you made a lot of money and will hit you with a huge tax bill. Not filing can cause you to lose capital loss carryovers for previous years. With 1099s filed by brokers, there is no place to hide.

14. Mishandling tax notices and IRS exams. Generally, IRS and state agents don’t understand a trading business. It’s not a passive loss activity or hobby loss activity, and various items are reported in different areas with complex and nuanced tax treatment and elections. State tax rules for entities usually make exceptions for trading businesses, but that is not always apparent. Before a tax exam gets out of control, consult with a trader tax expert to get it on the right path.

15. Being non-compliant on FBAR and other foreign tax reportingsuch as Form 8938 (foreign financial assets). Congress and the IRS are very concerned about tax cheats using offshore bank accounts, structures, and schemes. Not filing foreign bank account reports (FBAR) on time or correctly can be costly: Back taxes, penalties, interest, and even criminal proceedings could be the result. Consider the IRS’s Offshore Voluntary Disclosure Initiative (OVDI). (Note that this program is NOT amnesty; in some cases, it’s a mistake to enter OVDI when there’s a better way to come clean.) Generally, opening offshore entities doesn’t help reduce taxes as they are treated as disregarded entities or they are subject to passive foreign investment company rules. Avoiding the Commodity Futures Trading Commission’s rules for retail forex trading by using offshore accounts or entities doesn’t work.

Entities and retirement plans

16. Forming the wrong type of entity, and in the wrong state. If you live, work, and trade in your home state and want to form a pass-through entity, it’s best to form it there. Don’t fall prey to promoters in Nevada harping on the benefits of corporations formed in Nevada. If you don’t register that Nevada entity in your home state, you won’t have asset protection in your home state. A Nevada LLC filing as a partnership passes through its income to your home state.

17. Tapping into IRA and other retirement funds incorrectly, causing IRS penalties and trouble. Don’t get busted by the IRS for misusing your retirement funds. See our recent blog “Learn the DOs and DON’Ts of using IRAs and other retirement plans in trading activities and alternative investments” for more on this topic.

18. Triggering wash sale losses in IRAs which are permanently lost. Far too many traders make this tragic mistake. When you buy back a “substantially identical” security position in any of your IRAs 30 days before or after selling it for a loss in any of your taxable accounts, you can kiss that tax loss goodbye forever. It applies across husband and wife individual and joint accounts. Normally, wash sales are only a deferral problem, but in this case it’s a permanent problem. Abstain from trading substantially identical positions in your IRA accounts or house your active trading in an entity, which is a different taxpayer for purposes of the wash sale rules. A Section 475 election also solves this problem.

19. Choosing the wrong type of retirement plan. The Individual 401(k) plan for business traders is best. It combines a 100% deductible 401(k) elective deferral — where the biggest tax savings lies — with a 20% deductible profit sharing plan. Don’t forget to open this plan before year-end, even with no money contributed.

20. Paying self-employment (SE) taxes on trading gains. Only full members of futures exchanges owe SE taxes on futures trading gains. Too many traders pay SE taxes on these gains and the IRS doesn’t challenge it. Watch out for the new Affordable Care Act’s 3.8% Medicare surtax on unearned income starting in 2013.

Bottom line

Common mistakes cost traders tens of thousands of dollars per year on their tax returns. Don’t be penny wise and pound foolish. Spend a few dollars to buy premium trader tax guides to learn how to avoid these mistakes. Consider engaging a trader tax expert to help with your tax return elections, planning, and preparation. Use the right trade accounting software for securities. Some mistakes you can fix on tax returns on extension or on amended tax return filings. Other mistakes can’t be fixed, and you should focus on tax strategies to dig out of that hole.

Source: http://www.forbes.com/

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Most Frequent 14 Mistakes Made by Unsuccessful Traders

From my experiences as a fx fund manager and trading mentor, I collected and wrote 14 most common mistakes unsuccessful traders make.

Let′s begin!

1. They think trading is a business where you get rich over the night. With thinking like that they have an extra pressure, they forget on trading system rules and they start trading with the real money from day one, without understanding the markets and with over-exposing their trading account.

2. They do not manage their trading as a business. Their goals are low and they just want to make “quick fast small profits”. They do not organize their trading, they do not set achievable goals for themselves and they do not plan their trading for a few months or years further.

3. They always blame the markets, brokers and/or their trading strategy. They never take full 100% responsibility.

4. They always find the excuses to not place a Stop-Loss order (Account Protection Order!).

5. They do not listen to themselves, but always trade based on someone′s trading signals, media, crowd. They are the followers not leaders. They do not focus on themselves and their trading, but on what others are saying, thinking and doing.

6. They do not focus on success, but on excuses.

7. Day after day they do not practice discipline and patience.

8. To change their trading results, they are looking for free advices, tips on useless forums, books and other wrong sources of information.

9. They do not master the powerful trading system to understand the price movement and markets.

10. They trade without a trading plan and trading journal.

11. They do not manage their risk. They just “trade” (gamble) and hope market will move in their direction. Strong Money Management is unfamiliar to them.

12. They are changing and jumping from one trading system to another and looks for trading strategy with 100% winning trades.

13. Without real reason they are over-thinking about their trading (business!). That is how they are the worst enemies to themselves!

14. When the position is going their way or against them, they do not know how to manage it correctly to minimize their losses and maximize their profits on winning trades!

Now as you know what are the Most Common 14 Mistakes Unsuccessful Traders Make is now time for you to improve your trading results based on them. Do not wait for tommorow, but start TODAY!
Trading can be profitable only if you know what YOU are doing!

This is the chapter from Zan′s Amazon Book Forex Trading for Beginners: First Steps to Become a Successful Trader.

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Important Steps to Home Ownership

So, you’re ready to make the big leap into home ownership? Good for you. Home ownership can be a great experience and holds a number of tangible and intangible benefits. But first, you need to actually buy that property, which, especially if this is your first home, can feel more than a little complicated.

Understanding the mortgage process

Since a home is arguably the biggest purchase you’ll ever make, being prepared is key to having a successful experience. Doing some homework ahead of time – specifically on mortgage prequalification, the type of mortgage that’s best for you and determining how much home you can afford – will benefit you when it comes time to take the plunge.

U.S. Bank is a great resource to help you navigate the often complex home-buying process. And if you’re really new to this frequently perplexing world, look no further than Achieve Your Goals, a new financial resources site from U.S. Bank. It’s full of information on a wealth of topics, including a My Home section filled with great articles on everything related to mortgages, homes and the home-buying process.

What is prequalification?

Prequalifying for a mortgage is an important step in the home-buying process. It lets everyone involved know you’re serious about buying a home, and is a great way to help keep the process running smoothly. To see how much you may be able to borrow, and under what conditions, complete a mortgage prequalification request with U.S. Bank to get the ball rolling. You may be surprised what you may possibly qualify for. To do this, know that you’ll need to be a legal U.S. resident and 18 or older. Also, you’ll need to know your pre-tax annual household income and monthly household debt.

If you have been pre-qualified, the next step is determining what type of mortgage makes sense for your individual circumstances, as there are various types of mortgage loans. There are plenty of resources available where you can learn about the different types of mortgages that could be available to you.

How much home can you afford?

First, figure out your plans for occupancy. Are you intent on living in the house for only a few years? Or maybe for the rest of your life? Are you in the military? Or have your eye on your dream home? Your answers to these questions could determine the type of loan and home that will work best for your personal buying experience.

Whatever your circumstances are, give it some thought ahead of time. To get estimates of what your mortgage payments could look like, try this U.S. Bank mortgage calculators.

Once you’ve been prequalified, determined what type of mortgage makes the most sense for you and know how much home you can afford, you’ll be ready to start looking for that dream home.

[Source:onecentatatime.com]Sourse: Thefinancebucks.com

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Find the Reason Why You Aren’t Making Money In The Stock Market

This past week the bull run in the stock market marked its six year anniversary.  For six glorious years the market has been chugging ever upwards, recovering quickly from every dip, and setting all-time highs along the way.

For most investors this has been a wonderful time to be in the market--the salad days you might say.  So how has this six years been for you?  Are you getting what you want from the stock market?

 That may seem like a strange question to ask but sometimes we forget why we are in the market in the first place.  To make money.  That is it.  And if you are not making money in this market, or not making as much money as you think you should, maybe you should ask yourself why?

When I was younger and very green about investing in the stock market, I hooked up with an online community on the Prodigy Network.  It was full of traders and investors and some, like myself, were very new to the game, while others were seasoned professionals with decades of experience.

This was way before the Web 2.0 and social communities like Facebook and Twitter and we would exchange ideas and technical strategies through the Money Talk Bulletin Board.  The group grew to about 50 people and eventually we decided to have real live meetups around the country.

At the first meetup in Biloxi, Mississippi, I met a member by the name of Tim (which is not really his name since I don't want to embarrass him if he is still

Tim was a really good guy, with his own successful business, and had just started to get into the stock market, having read some of the classic books on trading and investing.

I remember how fascinated he was with the market and how he soaked up all the information at the meeting like a sponge.  Year after year, whenever I would see him at our annual meeting, it never failed to amaze me how much he had progressed since the previous year.  It even got to the point where he was giving detailed presentations to the group about all sorts of market topics.  I thought he might actually end up becoming a legendary trader.

But then one year I showed up and Tim wasn't there.  Nobody knew why and nobody had heard from him, which I thought was odd.  After the meeting was over, and I arrived back home, I found his phone number which he had given me a while back, and gave him a call.

He was surprised but glad to hear from me, and we chatted for over an hour.  It was then that I found out that in all the years I knew him, Tim had never been profitable in the stock market.  True, he knew a ton about the market and trading, but that didn't translate into profitability.

When I asked him why he thought that was, he was very honest. He told me that he got so caught up in the mechanics of the market that he had forgot what it was about--making money.  He spent so much time doing analysis, reading financial publications, reviewing charts, talking with other traders, posting on bulletin boards, trying new programs, and such, that he thought that was the point.

For all intents and purposes he was a trader, and an active market participant, who could talk a good game at parties, but he didn't make money.

Tim told me that he skipped the annual meetup because he was going back to the basics and cutting out everything that wasn't directly related to making money in the market.  And if you have not made money in this bull market over the last six years, you might want to ask yourself if Tim's story sounds familiar.

Source: http://stocks.about.com/

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How do the call options work and how to get extra dividends in the stock market

A call option is the right, but not the obligation, to buy a stock at a certain price. To a stock owner, this means a guaranteed income! And to a buyer, it means the possibility of netting a tidy sum.

With a call option, the buyer pays for the right to buy a stock at a certain price, at a certain point in time. Let’s say that a person believes a stock will be €5 in three months’ time, they can buy the right to buy that stock at €4 instead. Of course, if the stock is only at €3.50 at that stage, this right is worth nothing – and they don’t have to buy the stock since they are in no obligation to do so. On the other hand, if the stockdoes actually hit €5, they are able to buy it for less than the market price!

How does a call option work?

A call is an agreement regarding two things:

– a strike price: the locked-in price of the stock,

– a strike date: the agreed-upon date at which the sale will happen, if the buyer decides to go ahead and buy the stock.

And this agreement has a price: to lock in the price of the stock, the buyer agrees to pay a premium, whether or not they buy the stock in the end.

So the buyer buys two things:

– the right to lock in a certain price

– and then the actual stock at that particular price, if they still want to buy it at the strike date.

So, in a nutshell, this is what a call option is: Person A buys the right to buy a stock at a certain price from Person B. The right to buy the stock at a previously agreed upon price is a call option. The price that the potential buyer pays to lock in the stock price is the premium.

Who would want to buy a call option?

Let’s say a stock is looking good, the company offering that stock is healthy and doing very well.

A buyer might be interested in that stock, but for whatever reason (they don’t have the money right now to buy the number of stocks they want, they want to wait and see, or they have some other strategy), they decide not to buy the stock right now.

At the same time they believe that there is a high probability that the stock will go up, and they have a mind to buying it in the future. Tomitigate the disadvantage of buying the stock later for more money than if they bought it today, they can resort to calls. On the other hand, if the stock doesn’t actually go up in price, they may not want the stock at all! As a result, they just want the right, but not the obligation, to buy the stock at a certain price.

Their problem is that they don’t know how much the stock will cost when they actually get around to buying it. What if it skyrockets? Wouldn’t you be irritated to have to shell out €17 for a stock that only three weeks ago was trading at €10?

But for whatever reason you couldn’t or wouldn’t buy the stock three weeks ago. And you have to pay an extra €7 for not buying the stock earlier – unless three weeks ago you had the good sense of buying a call!

So the potential buyer enters an agreement with a person who holds that stock. The stock is currently trading at €10. They decide to pay the stockholder €1 to be able to buy the stock at €14 in six months’ time.

And what’s in it for the stockholder?

The stockholder makes both an income: the price of the premium; and a profit: if and when the potential buyer buys the stock from them, the buyer will buy it at a price higher than the stock is currently trading.

If I hold a stock that is currently trading at €10, and I sell a call option to sell that stock at €14 at a later date, on the condition that the potential buyer pay me €1 today, I have made:

– €1 (price of the premium, for securing the stock price),

– and €4 (difference between the current price of the stock and the price at which I will later sell it), if the buyer decides to exercise the option.

I have earned €5.

If the buyer decides to not buy the stock, I don’t make a profit, but I still have the income from the premium – and I still own the stock.

When I explain this, the overwhelming reaction is one of “But this sounds too good to be true!”

And in a way it is!

Whatever happens, you cannot lose money

But you might lose out – on a bigger profit.

This happened to me in 2009. I owned stocks in the emerging market index and they were trading at €33 or  €34. I sold a covered call to sell them at €35.

And then the index went up way past that. The person who bought the stock off me was very happy, as, by spending the price of the premium, they were now able to buy the stock below market price.

And I lost out on the profit I could have made by selling the stock at the higher market price.

But I had still made some income, and a profit… Not too bad!

For the buyer, call options are a means to potentially get a stock at a lower price than what the market is demanding, and for the seller, they are a means to guarantee they will earn money.

Source: http://www.thepositiveeconomist.com/

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