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Question regarding forex account base currencies

  • Post #1
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  • First Post: Dec 15, 2013 7:05pm Dec 15, 2013 7:05pm
  •  stefan416
  • | Joined Mar 2011 | Status: Member | 99 Posts
Hey everyone,

I have a question regarding account base currencies. Traditionally, accounts are typically based in USD, especialy coming from futures trading. I have opened a new account with IC Markets which gives me the option of opening an account in several base currencies. I am a Canadian/American living in Canada hence CAD currency is more useful to me when transferring cash out of my trading accounts and into my chequing etc. Originally I would have to either convert and then transfer or transfer and convert at my local bank thereby taking on currency risk when the conversion needs to take place (effectively gaining or losing money at that time).

In saying this, it would seem like it would make more sense to just hold a CAD account and not have to go through conversions when profits are transferred out. On the flip side however, how does this affect profits on a per trade benefit -- having to convert into CAD on the close of every trade? Im guessing the same would be true with a USD account trading non USD pairs correct?

If anyone with some experience/knowledge on this matter please clarify this for me!

Thanks,
Stefan
  • Post #2
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  • Last Post: Dec 17, 2013 7:04am Dec 17, 2013 7:04am
  •  ForexFocus
  • | Joined Dec 2013 | Status: Member | 70 Posts
Hi Stefan,

I am in the UK and always have my accounts in Sterling. The reason for this is simple... I live in pounds and hence don't want to be exposed to currency fluctuations when I am NOT trading... lord knows there is enough exposure whilst I am in trades without having to worry about it when you are not.

If you look back to 2007 ish when the GBPUSD was trading at above 2 you would have benefited from the drop if you lived in pounds but had an account in dollars. However the reverse is also true, if you held now in pounds and cable goes to above 2 you would suffer.

So I would recommend you hold in the currency you live in, just to eliminate exchange rate risk.

With regards to pricing and profits this isn't something you really need to worry about, your broker will let you know how much per pip and you calculate accordingly.

ForexFocus
 
 
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