Investment Basics: Foreign Currency Trading

By Elsie Dudukovich0 Comments

Sometimes called ‘forex’ or ‘FX,’ the foreign exchange currency market is the largest trading market in the world by volume and is also the most liquid market.  In a nutshell, investors are trading currencies from different countries against each other. This trading used to be the purview of central banks, hedge funds, large financial institutions, corporations, or the extremely wealthy, but has now opened up to average investors through online trading.  The nature of the currency market movements can offer eye-catching opportunity but there is a lot investors need to know before participating. 

 One of the words that come up when learning about forex trading is “exciting” and with its global structure, volatility, and sheer size compared to other trading markets, this is an understandable sentiment.  That said, the exciting prospect of an asset that allows for quick gains also sets the stage for equally fast, devastating losses.  While it is true of all investing, doing your due diligence and making sure you fully understand every aspect of how this investment works is vitally important in the fast-paced, complicated world of foreign currency trading.   If you are interested in learning more about currency trading, there are a wide range of tools and resources available to help you get started on your path to learning about forex investing. 

At Equity Trust, you can hold both traditional and alternative investments in your IRA.  If you are looking to invest in futures, forex, equities, and options, you do need to open a trading account with an outside brokerage for your IRA.  In addition to submitting the Trading Account Direction of Investment, you will need to submit your brokerage’s account application and any other documents they may need signed or reviewed. Make sure the outside brokerage account is set up under the name of your IRA, and not titled to you personally. 

It is also important to remember your IRA is self-directed.  You would work with your chosen brokerage to handle the buying/selling of specific futures, commodities, or currency. This is also true for the value showing in your IRA; your ETC account will only show the initial value of the investment until it is updated by submitting documentation from your trading brokerage.

If you’re an Equity Trust client who's a forex trader or interested in trading, stop by our myEQUITY online client forum to add to the conversation.
 
If you're not a client but would like more details on how forex trading works with a self-directed IRA, sign up for a free one-on-one checkup with one of our Senior Account Executives.