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Tax Advantaged Forex Investing

1.800.800.3840

THE WEALTH EMPOWERMENT GUIDE

100 South Wacker Drive, Suite 1225 Chicago, IL 60606+1.800.800.3840

[email protected] www.danielstrading.com

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Turner Breakout Reversal (TBR)Tax Advantaged Forex Investing

The WeAlTh empoWermenT GuIde

How to Use IRA and 401(k) Funds for Forex TradingThanks for taking the time to sign up for this brochure. In the next few pages our hope is to quickly and easily guide you through the process of learning how to use IRA and 401(k) funds to trade in the forex markets. Admittedly, this can be some dry material, but we believe that you will find the answers that you need. Ultimately, it is our goal to have you trade your tax advantaged forex business through Daniels Trading. Before we get there though, we need to make sure you understand the steps required, why it may make sense for you, the risks involved, and how we help.

In addition, Daniels trading offers tax advantaged futures investing as well. For more information on futures trading at Daniels Trading see our Guide: The Wealth empowerment Guide: how to use IrA and 401(k) Funds for Futures Trading at www.danielstrading.com.

The process begins with taking the first step. We are here to help you with that.



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The FirmFor almost twenty years, Daniels Trading has been helping clients manage and trade futures accounts throughout the world. Launched by renowned commodity trader, Andy Daniels, Daniels Trading has grown beyond trading and managing futures, however, and our firm now stands at the intersection of effortless connection to the forex markets and relationship based forex and futures brokerage. How does this relate to our investors trading forex in their IRA? Here’s how: Everyone at our firm, from our new accounts department, to licensed brokers, to managers are driven to accept nothing less than excellence when it comes to educating our clients, diligently assisting in guiding our clients through the new accounts process, and delivering superb on-going support for the life of our IRA forex clients. We call it excellence Through execution. For us, it is not just a company motto or a sign on the wall. It is a creed we live by each and every day.



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DIVERSIFYLet’s start off by clarifying a few key points when it comes to:

Did you Know……you can invest Individual Retirement Account (IRA) funds into forex? In fact, this investment may be right for a portion of your nest egg. The truth is most investors seek some form of diversification within their portfolio. While they allocate funds into traditional stock investments they often don’t realize that an entire world of alternative investing is open to them and they have the opportunity to broaden their portfolio.

…It may be possible for you to utilize the funds contained in a 401(k) to trade in the forex markets. By executing a simple roll-over from a 401(k) into a new or existing forex IRA, funds that have long been dormant in a past employers retirement can be accessed.



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…Retirement investing is not just for stocks! While you must first examine all the relevant risk issues, it may be prudent to invest a portion of your retirement funds into alternative invest-ments such as forex. At Daniels Trading the entire spectrum of global forex markets are open to you with an IRA account..

…Trading in a forex IRA is not just limited to self-directed online trading or working with a professional broker. In fact, you can invest with professional money managers that focus entirely on the commodities markets. This sector, called Managed Forex provides access to literally hundreds of professional money managers.

…It is possible that certain investments in forex may not be correlated to the stock market. While not a certainty, there are periods of time when some forex markets move counter to that of the stock market.

While our mission is to better help you understand the process and components of forex, IRA’s, and 401(k)’s, the element of diversification is, in our opinion, a key part of the retirement investment puzzle. Since you came by this Guide via a forex and commodities brokerage firm it is logical that you have an interest in forex because of diversification. However, it is important to understand that when we refer to using retirement dollars for investment in forex, we are referring to utilizing just a portion of your retirement funds for forex. We do not advocate using a majority of your nest egg for forex investment because of the substantial risk involved with forex investing.

What are you doing to Diversify?Over the course of the past 15 years, we at Daniels Trading have spoken to literally thousands of investors. Along the way, many have shared their stories of how they go about retirement investing. Many rely on their employer’s internal program with very limited options. They literally pick from a handful of available “plans” once or maybe twice per year and that is the extent of their “retirement planning!” Our opinion is that there is more to retirement investing than checking a box.

As you might surmise from the section heading of Diversification, it is our opinion that prudent and thoughtful diversification and the possible inclusion of alternative investments are key to good retire-ment planning. Further, we believe that emphasis should be placed on the “prudent” and “thoughtful”



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aspects of including forex into your retirement portfolio. The reality is that we are still dealing with the substantial risks involved with forex investing. Furthermore, we believe forex may be right for a portion of your nest egg and not the majority of it.

Tax advantaged investing in forex may be the most overlooked method of funding a forex account

The bottom line is that you don’t have to use free cash to trade in forex. In addition, virtually the entire spectrum of forex investment is open to you. Investors can access the forex via a forex broker, online trading software and through professional managers (Commodity Trading Advisor). You are in complete control of your investment.

Why this Investment Vehicle May be Right for youAccording to the Investment Company Institute and the US Census, approximately 70% of all US households have some form of formal retirement accounts, either through their employer or on their own. However, many choose not to either actively fund or participate beyond what their employers do for them when it comes to their retirement accounts. The Investment Company Institute points out that as of 2006, only 14% of US households that were eligible, made contributions to their IRA account. Why



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does this low rate of engagement occur? It may be the complexity of the vehicle itself. At last count, the IRA brochure on the IRS website was 108 pages long. Our job at Daniels Trading is to be your guide when it comes to forex and options investing with your IRA. Our job is to make the complex, simple!

While forex and options are not suitable for all investors, we believe that prudent investors should examine the possibilities that this alternative investment presents. Are you fearful that picking from the list of mutual funds offered within your employer’s retirement plan will not give you what you need? The world of forex and options may be right for you.

have you been following forex and have the time to devote to trading, but lack the free funds to invest? Tax advantaged forex investing may be for you.

Another unique aspect of forex is the availability for increased leverage and purchasing power. In stocks, very little investing is done “on margin.” When you buy $10,000 worth of Apple stock, this is exactly the amount of the investment you control. In forex, your $10,000 may control many multiples of that. This can be a double edged sword though. Should the markets move against you all that leverage may escalate your losses quickly.

The rISK oF loSS In TrAdInG CommodITY FuTureS opTIonS, And ForeX ConTrACTS CAn Be SuBSTAnTIAl. There IS A hIGh deGree oF leVerAGe In FuTureS TrAdInG BeCAuSe oF SmAll mArGIn reQuIremenTS. ThIS leVerAGe CAn WorK AGAInST You AS Well AS For You And CAn leAd To lArGe loSSeS AS Well AS lArGe GAInS.

TAKING ACTIONHopefully, at this point we have established that there is something to talk about in terms of including forex into a portion of your nest egg investing. A clear next step would now be to work toward developing a plan of action to get there. More directly, how do you fund your diversification ideas? This leads us to one of the core points of our philosophy and that is examining funding sources such as IRA’s and 401(k)’s. Not only should we be looking at possible funding sources, but equally impor-tant is for you to seize more control over your retirement picture.



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Found MoneyPossible funding sources for commodities and options investing may be closer than some people realize . While many investors we come in contact with are actively par-ticipating in their retirement investing, many are somewhat passive about it. In fact, we have come in contact with numerous of investors and many share stories that depict somewhat “untouched” retirement accounts.

have you ever thought of putting those untouched funds to work for you?It is thought that the average worker has held ten jobs by the time they reach forty years of age. Is it possible that there are some untouched 401(k)’s that could be used for forex investment?

We believe that tax advantaged investing in forex may be a seriously overlookedmethod of funding for an account

Forex Investing ChoicesThe bottom line is that you do not have to use free cash to trade in forex. In addition, virtually the entire spectrum of forex is open to you. You can trade and invest in forex with your IRA, any way you wish:

Broker-Assisted: Work with a professional broker to assist in placing complex orders or perhaps follow a newsletter or trading strategy. Also ideal for those that prefer a more human experience in trading versus a technology based path.

on-line Trading: Get access to some of the finest trading platforms in the industry. With Daniels Trad-ing you also have the ability to select your level of service. You can be fully automated or work with a professional online trading specialist to assist you. Trade online with any of our trading platforms.



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managed Forex: For those investors who wish to defer trading to professional and registered Commod-ity Trading Advisors to make all trading decisions on their behalf. Also, managed forex accounts provide for the ability to make investment decisions using real-time track records of trading performance.

Automated Strategies: Trade your IRA with an automated strategy making the day-to-day trading decisions. Many experienced traders, frustrated by the lack of their own success migrate to this style of futures and options investing.

Who Invests in Forex using IRA Funds?Typically participants are those investors that seek an alternate form of funding for their investing. Ultimately, Daniels Trading noticed that those looking to maximize their tax savings and exercise as much control as possible over their accounts, often find this investment vehicle a great fit. A word of caution, as it is advantageous to be able to defer taxes until retirement age; the flip side is that when using IRA funds to invest, you are not able to write losses off on your taxes. This is in addition to the overall risk involved with forex and options investing.

ASSISTANCEWe understand that the process of navigating through the world of IRA’s, 401(k)’s, and forex can be daunting. We are here to help. It is not just a marketing slogan for us at Daniels Trading. We are committed to making sure that every question gets answered and that we provide the assistance you need to move through each step as effortlessly as possible.

The Steps

STep #1Identify your Current Situation: The first thing you need to do is to understand exactly what your current retirement portfolio is doing. Identify the plans and programs you currently have including those with a former employer. Contact old employers if necessary, pull out old statements, and do your best to assemble the records. Think you have lost track of an abandoned 401(k) from a former employer? Go to this United States Department of Labor site to look for abandoned plans: www.askebsa.dol.gov/abandonedplansearch

Special note: As we refer to 401(k)’s it is important to note that to gain access to these funds for forex investment, you will seek to do what is called a roll-over, not ask for a distribution. In essence, you are rolling your retirement investment from a 401(k) to an IRA. A distribution causes the plan administrator to forward you the cash directly without immediately investing in a tax-deferred vehicle. This could leave you open to tax liability.



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What Type of IrA? To do tax advantaged forex investing you will participate through a Self-Directed IRA accounts. These “Self-Directed IRA’s” differ from traditional retirement accounts in that they allow the user more flexibility, which in turn allows investment vehicles such as forex, as opposed to merely stocks and bonds. Self-directed IRA’s get that designation because the investor is the one making the ultimate decisions as to how the funds are invested. At Daniels Trading, we are here to provide you with the education needed to take advantage of the potential benefits of self-directed IRA investing. As with any investment, there is risk. We will help you understand the relevant points of both and most importantly, get your questions answered. We will help you through the entire process and make this as easy as possible!



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What IRA Plans are Available for Self-Direction?

You can use any one of the following IrA plans to invest in forex:

Traditional IrA: An individual retirement account (IRA) that allows individuals to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Traditional IRA. Contributions to the Traditional IRA may be tax-deductible depending on the taxpayer’s income, tax-filing status and other factors.

roTh IrA: An individual retirement plan that bears many similarities to the traditional IRA, but contri-butions are not tax deductible and qualified distributions are tax free. Similar to other retirement plan accounts, non-qualified distributions from a Roth IRA may be subject to a penalty upon withdrawal.

A qualified distribution is one that is taken at least five years after the taxpayer establishes his or her first Roth IRA and when he or she is age 59.5, disabled, using the withdrawal to purchase a first home (limit $10,000), or deceased (in which case the beneficiary collects). Since qualified distribu-tions from a Roth IRA are always tax free, some argue that a Roth IRA may be more advantageous than a Traditional IRA.

Sep IrA: A retirement plan that an employer or self-employed individuals can establish. The employer is allowed a tax deduction for contributions made to the SEP plan and makes contributions to each eligible employee’s SEP IRA on a discretionary basis. Contributions to SEP IRAs are immedi-ately 100% vested, and the IRA owner directs the investments.

SImple IrA: A SIMPLE IRA plan is an IRA-based plan that gives small employers a simplified method to make contributions toward their employees’ retirement and their own retirement. Under a SIMPLE IRA plan, employees may choose to make salary reduction contributions and the employer makes matching or nonelective contributions. All contributions are made directly to an Individual Retirement Account or Individual Retirement Annuity (IRA) set up for each employee (a SIMPLE IRA). SIMPLE IRA plans are maintained on a calendar-year basis.

roTh IrA In-depth

It is fair to say that ROTH IRA’s may offer unique opportunities when compared to the other forms of retirement investing. Depending upon your level of comfort and suitability with risk, we believe that the use of ROTH IRA funds for forex investment may be a prudent source of funding. In fact, we believe that ROTH IRA’s are so popular that we have produced some additional information and comparisons below to help you navigate the retirement waters a bit more efficiently.



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ROTH IRA ThumbnailThe big draw and possible source of popularity for the ROTH IRA is that all earnings are tax free when you or your beneficiary withdrawal them. Other potential benefits include avoiding the possible early distribution penalties for certain withdrawals and eliminating the need to take minimum distribu-tions after age 70 1/2.

The Good and the BadThe attraction of the ROTH IRA is the ability of your investment earnings to escape taxation com-pletely. The downside is that you don’t get the tax deduction when you contribute as with traditional IRA’s. Which is better? Without a doubt, you need to consult a tax professional before making any decisions. It is perceived by some that the ROTH IRA is friendly to investors because it is effectively bigger than a traditional IRA because it holds after-tax dollars. Further, if you can push drawing on your retirement funds past the 70 ½ age you can, in theory maximize your contributions and add greater tax leverage. Obviously, your investments need to be successful for this to work.

Who can Participate?You can either establish a new ROTH IRA by making a regular contribution or by converting a traditional IRA into a ROTH. You may also be able to make a regular contribu-tion to a ROTH IRA even if you participate in a retirement plan maintained by your employer. These contributions can be as much as $5,000 ($6,000 if you are 50 or older by the end of the year). The two criteria are that you or your spouse must have qualifying income at least equal to

the amount contributed AND your modified adjusted gross income can’t exceed certain limits. The last published limits were $107,000 for single individuals and $169,000 for married couples filing joint returns. As always, see a tax professional for the most current limits.

You can also convert a traditional IRA into a ROTH, but as always, there are tax implications.

DistributionsAll distributions from your ROTH IRA are tax-free until you’ve withdrawn all your regular contributions. After that you will be able to withdraw your conversion contributions. When you have withdrawn all of your contributions, any subsequent withdrawals come from earnings. These earnings are tax-free if you are over 59 ½ and at least five years have gone by since you established your ROTH IRA. Other-wise (with some exceptions) they are taxable and potentially subject to penalties for early withdrawal.



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Comparing Traditional and ROTH IRA’S

TrAdITIonAl IrA roTh IrA

description A type of retirement savings plan that offers tax advantages for individuals to set aside money. Contributions are made with pre-tax dollars.

A type of retirement savings plan that offers tax advantages for individuals to set aside money. Contributions are made with after-tax dollars.

potential Tax Advantages Investment compounds as tax-deferred until funds are withdrawn.

Investment compounds tax-deferred. However, funds that are withdrawn are tax-free if account is five years old and account owner is over 59 1/2

maximum Contributions(Source www.irs.gov)

If you are under 50 years of age at the end of 2012: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2012. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (modified AGI).

If you are 50 years of age or older before the end of 2012: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2012. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified AGI.





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TrAdITIonAl IrA roTh IrA

eligibility You can open and make contributions to a traditional IRA if:

• You (or, if you file a joint return, your spouse) received taxable compensation during the year, and

• You were not age 70½ by the end of the year.

• You can have a traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan.

You can open and make contributions to a traditional IRA if:

• Single or head of household: you must earn less than $107,000 to fully contribute to a Roth IRA

• Married filing jointly or a qualified widow(er): you must earn less than $169,000 to fully contribute to a Roth IRA

• Married filing separately: you must earn less than $10,000 to fully contribute to a Roth IRA.

Tax deductions on Contributions

Yes no

penalties for early Withdrawal 10% penalty for withdrawals before age 59 ½ plus you will have to pay the tax on those funds.

10% penalty for withdrawals before age 59 ½ plus you will have to pay the tax on those funds. There are exceptions to these rules. Please see your tax professional for updated IRS rules.

How it WorksTraditionally, to trade forex you would simply open a brokerage account and begin trading. Since IRA funds are involved the Internal Revenue Service requires one additional layer of complexity with the addition of a custodian. As you are dealing with retirement funds and potential taxation implications, the custodian is there to establish the IRA account, handle all tax reporting and facilitate the transfers of funds.

SummArY: First identify your current retirement investment situation and then set up a forex IRA account with a custodian.

Step #2You will need to establish a forex brokerage account with Daniels Trading at one of the FCM’s we work with. Even if you already have an account, you will still need an “IRA” designated account. Your Daniels Trading broker is there to help you with this step.

Step #3Fund your account either with new funds or transfer all or part of your IRA funds from an existing retirement account.



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here are the steps:

1. Establish your forex brokerage account with Daniels Trading by completing and

2. returning the New Account paperwork.

3. Establish your IRA custodian account. Your Daniels Trading IRA specialist will provide you with the appropriate New Account paperwork.

4. Fund your account either with new funds or transfer all or part of your IRA funds from an existing retirement account.

INVESTOR

BROKERAGE FOREXMARKETS

CUSTODIANHouses the IRA

and Funds

Connects theInvestor and IRAto the forex andoptions markets



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TransparencyA Tax Advantaged Daniels Trading account enjoys full 24/7 access to your account positions and balances in addition to daily and monthly statements. You will also get full accounting and statements from your custodian.

how the money FlowsYou can use up to 70% of the balance in your account for forex investing and the remaining 30% is not eligible. This includes funds used to open the account, and all subsequent deposits, including contributions, rollovers and contributions.

Those funds not invested in forex may be invested in investments such as certificates of deposit, money market accounts, treasury securities, or an FDIC insured interest bearing account.

All funds are handled by the Custodian. All contributions/deposits to your account must be sent to the Custodian directly. From there it will be credited to your forex account for use in the markets. Again, all liquidations and distributions of funds are handled by the custodian as part of your retirement account. Sending funds directly to Daniels Trading or receiving funds from the brokerage firm would create potential tax liabilities and doing so may disqualify the tax exempt status of your investment.

Funding your accounts is simple. If you are starting a new IRA, simply wire the funds or send a check to the custodian. If you are transferring all or part of an existing IRA, the process is automatic.

If you have an existing IrA account, you can transfer some or all of those funds into a new retirement account.

Funding of Margin and Debit CallsFunds invested in a tax advantaged IRA forex account is subject to margin calls and the risk of trading. Should there not be sufficient funds in your account, you will need to sell or liquidate your investment at market value which may be more or less than your cost basis. Keep in mind that here may be additional fees should you wish to fund calls with additional deposits to your IRA.

FeesEach Custodian has a separate fee structure and your Daniels IRA specialist can help you with full disclosure and transparency when it comes to fees. Typically, there is an annual fee to administer your IRA account and do all reporting for you and the IRS. Before you begin, you will be apprised of all relevant fees and costs.



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SummaryWe hope you have found this guide to be helpful. Please contact us and take advantage of the assistance offered via Daniels Trading. Our pledge to each of our clients and perspective clients is to guide you, step by step through the process of establishing your tax advantages forex account. Please, take the first step. We will help you.

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