compared to stocks, futures. which is the *unique* characteristic of forx trading? and how the tax should be reported? if I buy and sell hundreds of times in one year, should I just report it as future or should detail each trade like stocks? thanks
Depends on what kind of edge you have. More efficient so strategies exploiting that kind of stuff will work less. However, they are more efficient, if you have a real edge in PA or trends then you can make some real bank. IMO those kind of strategies are inherently harder, although the rewards are much grander.
At high enough leverage and normal trading conditions in forex(say 300:1+ which is beyond suicidal) you can lose all your money in seconds, which would never happen in stocks or options or futures (bearing a catstrophic fundamental announcement which is different) I would say forex at normal leverage (100:1 and below) and options with 1 months or less to expiration, options are scarrier to trade than either options on stocks, options on futures, futures or stocks themselves. I would put it this way, in terms of stress under regular conditions: Options on stocks>Forex>Options on Futures>Futures>stocks In terms of highest possible stress, forex kills them all.
In my opinion FX is second to only one other asset... natural gas. FX is incredibly volatile and (usually) highly leveraged. It was common to trade with 200, 300, 400, or even more:1 leverage not long ago, but some regulation in the US has limited it to 100:1. And that is pretty common although some brokers allow you to adjust lower if you wish. Coupling the volatility with the high leverage the previous poster is correct that you can blow your account in seconds quite easily. I've been trading FX for years and traded FX futures and spot at a hedge fun for awhile. I love it. And I love it because of the things I listed above. Risk and the challenge of being successful where 99% of people are afraid to even attempt to be and 99.9% of people that do attempt end up failing fail is simply attractive to me. It's been a theme my entire life. So why not trade natural gas and take it a step further? FX is extremely scalable and liquid. Read up on Soros' amazing trade shorting the British Pound... he took home $1B (yes that's a B) on that one trade... not many markets can absorb trades like that. If you can handle the stress, pressure and exhilaration I highly recommend trading FX. If you have ANY sort of problem with any of those... run fast and never look back. Most people fall into the latter category and should never be judged for it. We as humans and the way we're brought up generally aren't hardwired for trading in general, let alone trading FX. Just my 2 cents.
The conventional wisdom seems to be to report forex P/L just like futures on form 6781. That will give you a 60/40 long term/short term capital gains split. No details needed. But would appreciate comments from anyone who's gotten conflicting advice. Seems to be a gray area at this time.
i find trading the euro soooooo much easier than something like the es for example. it moves it has clear PA nice swings etc etc
I think it's easier right now as the moves seem smoother and larger than other markets...how long this lasts for?