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.
Futures trading is one of the most popular and common investments in a self-directed IRA. Investors need knowledge and understanding of the markets and how they trade. Most futures trading in an IRA is done in a managed account where a fund manager handles all trades.
Forex trading is the trading of currencies. Currencies trade against each other as exchange rate “pairs.” For example, the Euro traded against the US Dollar, EUR/USD pair. Many different currency pairs are available to trade, and you are not limited to USD pairs.
Investors should have the training and expertise in trading before starting these highly specialized and volatile investments. Midland only allows trading with US-based currency exchanges.
Open your Midland Trust account
The first step is to get your account opened with Midland Trust. We have a secure online application for your convenience to get your account ready to go.
Set up your trading account
Once you have an account with Midland, a trading account is set up in the name of your IRA.
This way, the entity doing the trading is not you personally but is your Midland retirement account.
Use your funds in your Midland Trust account to begin trading
We work with your current IRA holder to move your funds into your Midland account. Once your funds are with Midland, you instruct us to release them to your trading account, often via a wire, and then you are up and running.
4 reasons a new client is happy they switched to Midland
"I had previously been a long-time customer of (Competitor's Name) and was skeptical switching over to Midland Trust. Long story short, Midland Trust client support was much better, resulting in quicker responses and less headaches overall. I had a couple complex issues to sort out at different times and Andrew A. at Midland handled both superbly. Second, Midland offers additional services unavailable through (Competitor's Name) including Futures, Forex. Three, Midland's fees were actually lower. Four, Midland's online portal provides a greater degree of account management to the user than Madison offers.”
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.
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 are the margin requirements?
Margin requirements will vary by futures and forex company. Generally, with IRAs, you can have margin, but margins will be stricter/less than you would see in a personal (non-IRA account). The reason is IRAs cannot personally guarantee funds. The stricter margin requirements are to make sure your IRA account does not fall into the negative.
What are the trading commissions?
Trading commissions fall to the futures/forex company.
Midland only has a charge when you are sending funds to the futures/forex company OR removing funds from the futures/forex company.
Once funds are in the futures/forex account you will be paying whatever commission the futures/forex company charges.
Are there 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.
What is 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.
How much money should I keep in my IRA trading account?
You should always have enough liquid assets in your IRA to cover potential margin calls. If a shortfall has to be funded, personal assets cannot be used.
Why would I work with Midland?
To trade using retirement funds, you need an IRA custodian. Midland is best in class in this arena when it comes to value, service and technology.
We have specialized in trading IRA Accounts for over two decades. We are tied in with this industry, we know what brokers and investors need from us so we make it fast and simple every step of the way.
Send us your own questions. We're happy to help!
ONE OF THE FOREMOST, NATIONALLY RECOGNIZED ORGANIZATIONS REPRESENTING PROFESSIONALS IN THE FUTURES AND OPTIONS INDUSTRY.