Hi Everyone,
First off let me wish everyone around the world a happy new year and much success in 2011!
I have a question that I’m hoping someone can help me with. I’ve been trading forex for about 5 months now. In my first 2.5 months I lost around 6K, and after treating that as a very real educational period, improved my understanding of forex and my approach and managed to win that money back in the subsequent 2.5 months. So now I am at break even. For me it’s great to have earned all that money back - even if I end up where I started.
Now for the negative - this month turned out to be terrible in unrealized losses - to the tune of around 8K in unrealized losses, mainly due to betting against the Australian dollar (shorting it - bad move it seems) and the huge drop in the Turkish lira, which I was using as a nice carry trade (it has fallen strongly since Turkey cut rates).
So my question is, what do I do about reporting forex related taxes? Can I report my unrealized losses? I would naturally prefer to report them as it would help relieve my overall tax burden.
Also, if anyone has any insights on the Australian dollar or Turkish Lira, I would be all ears.
Thanks in advance!
This really is tax issue, not forex, and it will be dependant on which country you live in.
Hello.
Well I cannot advise you on your issue regarding unrealised losses although my logic tells me that only realised losses and relised profits should be taken into account or not. I mean to say: a loss is not a ‘loss’ until it’s realised and a profit is not a ‘profit’ until it’s realised. That would make sense to me anyway.
Regarding AUD and TRY though: oddly enough the TRY is one of the very few currencies that I look out for because I like the way it ‘moves’ (I’m ‘by nature’ an equities and commodities trader but sometimes a signal on certain forex pairs is just ‘too good to pass up’ I guess). I was wondering how come the USD was appreciating against the TRY while ‘tanking’ against just about everthing else (so you have at least answered THAT question of MINE)!!! LOL!!! But I’ve just had a look at some charts i.e.TRY/BGN, TRY/JPY, TRY/RON, and USD/TRY. Depending on where they close on Monday (with the exception of USD/TRY which I’ve just been short on) I’ll have long signals generated by at least one of my trading systems. Same thing with AUD/USD (a short signal on its way).
I must just tell you this though (and everybody else for that matter): I get daily updates from Larry Levin (active floor trader and popular commentator on Bloomberg TV) (well at least I hope I’m correct about my source of this anyway) and he (or whoever) was saying that the Fed may just HAVE to HIKE interest rates possibly as early as this month (I forget the reasons given for this possible event taking place). Has anybody else heard something like this??? My point REALLY is this though: the USD is still and will forever be the worlds reserve currency and it’s not going to stay down forever that’s for sure. One INTERESTING thing that I’ve read though: under NORMAL circumstances a rise in interest rates causes equities to fall but the general perception is that THIS time around a rise in interest rates will actually HELP the markets because it signals that things are slowly ‘coming right’ in the US.
Very true. If you’re in the US spot forex is treated like futures, which are handled on a mark-to-market basis where your taxes are concerned. That means whatever open position gains or losses you have at year-end are considered recognized.