Forex Trading: Conduct Your Trading Like a Small Business

By Kerry Parker

Looking at your FOREX trading - or any trading activity -as though it is a business offers several advantages.  First, it forces you to keep track of your expenses, including trading commissions, slippage, interest charges on margin accounts, etc.  If these fees are unusually large, it may indicate that you need to reevaluate your trading style.  (Over-trading is often the reason new traders fail: it is quite possible to over-trade a profitable trading system and realize little or no profit).  Good book keeping also eases the workload at tax time.

Although running your trading as an actual business - including deductions for expenses, and using losses to offset gains, can be a bit complicated, it is possible.  The rules regarding FOREX and US income tax are finally receiving some attention.  The folks over at Traders Accounting seem to know their business.  Although I have not personally used their services, their website contains a good deal of information http://www.tradersaccounting.com.

Another great option to ease the tax burden of your FOREX trading profits is to create a FOREX self-directed IRA.  This is not as difficult as it might seem.  You can find a good deal of information at Equity Trust.  This is company that acts as the custodian of a self-directed IRA. Their website is at  http://www.trustetc.com.

The first step in building most any business is to generate sales.  In the case of a FOREX trading business, generating sales equates to running a profitable trading system.  This can, and should be done, using a demo account.  When your trading systems are consistently profitable and you have adequate starting capitol, the real trading can begin.  At this time, it is a good idea to consider this trading activity as a business and employ the usual business tactics to remain solvent and profitable. 

- Kerry Parker, iExpertAdvisor

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