Futures and Forex Trading

Futures Trading in a Midland IRA

Futures trading is one of the most popular and common investments in a self-directed IRA. Typically, the IRA owner has expertise in market trading. Never is this more true than with futures and forex traders. Investors need knowledge and understanding of the markets and how they trade. The majority of futures trading in an IRA is done in a managed account where a fund manager handles all trades.

What is futures trading? Futures trading is a contractual agreement between a buyer and seller on a specific price for a commodity such as gold, oil, or orange juice at a specified date in the future. The buyer of a futures contract is taking on the obligation to buy and receive the underlying asset when the futures contract expires. For this reason, futures trading, especially in IRAs, is often speculative, and the contract sells before expiration. Still, it can also be used for hedging against the market or industry. You can trade futures on stock exchanges by buying contracts in the S&P 500, the DOW Jones, and Bitcoin. Unlike the stock market, futures trading is nearly 24/7.

Forex Trading

Forex trading is the trading of currencies. Investors have learned to trade Forex in their self directed IRAs. Investors should have the training and expertise in trading before getting started with these highly specialized and volatile investments. Midland only allows trading with US-based currency exchanges. It is important to understand the intricacies of Forex trading or to work with an experienced manager. Open a Midland self directed IRA and get started investing in Forex today.

How does Forex work? Currencies trade against each other as exchange rate “pairs.” For example, the Euro traded against the US Dollar, EUR/USD pair. There are many different currency pairs available to trade, and you are not limited to USD pairs. As another example, you could trade the Japanese Yen against the Euro, JPY/EUR pair.

Unique Trading Times for Forex

Unlike the stock market, the forex market is open nearly 24/7 as it is open 24 hours a day from 5 p.m. ET on Sunday until 4 p.m. ET on Friday. This unique timing is because currencies continue to trade in markets worldwide, even after the New York exchange closes. Forex trading opens daily with the Australia/Asia area, followed by Europe, then North America.

New York: 8 a.m. – 5 p.m. ET
Sydney: 5 p.m. – 2 a.m. ET
Tokyo: 7 p.m. – 4 a.m. ET
London: 3 a.m. – 12 p.m. ET

During timezone overlap, liquidity and trade volume increases. The two busiest timezones are New York and London, especially during their overlapping sessions. The New York and London overlap accounts for the majority of this five trillion dollar per day market.

Forex markets are utilized by Banks and other financial institutions to hedge their foreign currency holdings as conditions change globally. Individual investors are also able to participate in these markets.

Investment Process 

Trading Accounts Steps Infographic No Background

Types of Futures & Forex Trading

  • Self Directed Trading
    • Trade futures/forex independently with a self directed account (for the experienced trader).
  • Managed Accounts
    • Let a professional money manager (Commodity Trading Advisor) do the trading for you.
  • Automated Accounts
    • Automated trading programs able to execute orders at high-speeds following trading algorithms.

Benefits of Investing With Your IRA

  • Building for Retirement
    • Most Americans do not want to rely on Social Security.
  • Earnings Growth
    • The gains within self directed IRAs and other plans accrue on a tax-free or tax-deferred basis to benefit you when you retire.
  • Tax Deductions Can Be Taken on Contributions to Your Self Directed IRA
    • While this does not apply to Roth IRAs—most contributions to other retirement plans and self directed IRAs are eligible deductions on your income taxes.
  • Roth Self Directed IRAs Are One of the Most Beneficial Retirement Plans Available
    • All contributions are made after tax, but the earnings grow on a tax-free basis provided that certain requirements are met.

Midland’s Role Once the Trading Account is Open

All trading will be done with the FCM. Midland is responsible for all cash flow record-keeping related to the IRA-owned trading account. Whenever you are looking to add additional funds or remove funds from the forex account, it will need to flow through your Midland account. Midland handles the ongoing tax reporting for contributions & distributions of assets held in your Midland retirement account.

Important to Note: Trading accounts must be held in title by the investor account: Midland Trust Company as Custodian FBO Client Name Client Account Number.

Futures & Forex Trading FAQs

I already have a trading account with this futures/forex company. Do I need a new one?

Yes. IRA funds and personal funds must not be commingled in the same account. A new application will need to be completed specifically for the IRA.

I already sent paperwork to the trading company to open an account. Do I still need to send a copy to Midland IRA?

Yes. To ensure the trading account is titled to Midland Trust Company as Custodian FBO Client Name Midland Account Number, we must be involved with the account establishment. Midland will also need to verify that the correct Trust Tax ID is tied to the account (not your SSN). If you indicated on the forex trading company paperwork that it is to be tied to an IRA account at Midland, they will likely send Midland a copy. Midland will work with you and the forex company to make sure the account is established properly and tied to an IRA.

What happens after my trading account is open?

After the forex account is open and funded by Midland, you will work directly with the forex company to place your trading requests. You can do this through your online access with the forex trading account company or by calling your forex company representative.

I want to remove funds from my futures/forex trading account. Can I do this with them directly?

No. All funds must flow through Midland IRA. If you take funds from your forex trading account directly, this may be deemed a prohibited transaction. Midland has established rules with the forex companies to have them redirect you to Midland whenever you want to remove funds to make sure the movement of funds is properly reported to the IRS.

What happens after my trading account is open?

No. All funds must flow through Midland to ensure we are doing the proper record keeping and reporting to the IRS on the movement of funds. Whenever you are looking to add additional funds to the forex account you will need to go through Midland to ensure the contribution, IRA to IRA transfer, or rollover of funds into the IRA are properly recorded and reported to the IRS.