Should I open AUD account if im trading major pairs? | Forex Factory

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Should I open AUD account if im trading major pairs?

  • #1
  • First Post: Dec 16, 2010 11:23pm Dec 16, 2010 11:23pm
Hi, I have decided to open an account with an overseas broker (outside of Australia where I live). I have the option of opening up an AUD account. This was the path I was going to go with. But on hindsight, if I am going to be mostly trading the major pairs, wouldn't it be better if I had a USD account? My reasoning is that if I have a AUD account and trade USD/XXX and XXX/USD most of the time, I will be susceptible to the AUD/USD currency rate with each trade I make. If I am going to do frequent trades (10+ per day) then this will go against me. Would it be better to just open a USD account?

Cheers,
V
  • #2
  • Dec 17, 2010 1:21am Dec 17, 2010 1:21am
Quoting voirin
Hi, I have decided to open an account with an overseas broker (outside of Australia where I live). I have the option of opening up an AUD account. This was the path I was going to go with. But on hindsight, if I am going to be mostly trading the major pairs, wouldn't it be better if I had a USD account? My reasoning is that if I have a AUD account and trade USD/XXX and XXX/USD most of the time, I will be susceptible to the AUD/USD currency rate with each trade I make. If I am going to do frequent trades (10+ per day) then this will go against me....
Oanda and IB will pay you benchmark AUD rates on your AUD account balance, something that's probably worth keeping.

IB is unique in that your P&L in a foreign currency remains in that currency until which time you covert it back to your base currency. So you could open an AUD account with them, trade whatever pairs you wish, accrue P&L in whatever currency you're trading, then convert that P&L back to AUD whenever you want. I have a USD account with them, but I've had open simultaneous balances in USD, GBP, AUD, CHF, EUR, etc.

IB is the only broker I know of that operates in this logical manner. Every other retail shop won't let you accrue multiple currency balances. Your foreign currency P&L is converted back to the base account currency after every trade, which for an AUD account holder trading USD pairs would be disadvantageous since you'd be paying the AUD/USD spread with each conversion (rather than just when you decide to as in the example at IB).

Since the P&L conversions are instantaneous, most traders don't realize they're paying the extra spread on their foreign P&L conversion.
  • #3
  • Dec 17, 2010 8:51am Dec 17, 2010 8:51am
Thanks for the clarification and insight Trader KGB. I will look into IB as a possible broker option. Their delayed conversion process is unique. I haven't heard of it being done this was anywhere else in the industry.

Many thanks!
V
  • #4
  • Dec 17, 2010 6:16pm Dec 17, 2010 6:16pm
Quoting voirin
Hi, I have decided to open an account with an overseas broker (outside of Australia where I live). I have the option of opening up an AUD account. This was the path I was going to go with. But on hindsight, if I am going to be mostly trading the major pairs, wouldn't it be better if I had a USD account? My reasoning is that if I have a AUD account and trade USD/XXX and XXX/USD most of the time, I will be susceptible to the AUD/USD currency rate with each trade I make. If I am going to do frequent trades (10+ per day) then this will go against me....
Where are you located? If you are in the USA, you are limited to open ad account with an overseas broker.
  • #5
  • Dec 20, 2010 3:08am Dec 20, 2010 3:08am
I'm in Australia. It's a shame they limit US citizens that way...
  • #6
  • Last Post: Dec 20, 2010 7:59am Dec 20, 2010 7:59am
I once burned my fingers because my account was in AUD but I was trading US based pairs and subject to daily AUD risk rather than end of trading( I am also based in Australia)
I then changed to USD balance ( although my broker was based in Australia)
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