Does it matter what base currency account is based on? | Forex Factory

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Does it matter what base currency account is based on?

  • #1
  • First Post: Apr 10, 2014 9:47am Apr 10, 2014 9:47am
Assuming you're going with an overseas broker, do you guys usually convert your funds to USD, or just leave it in your local currency and let the XX/USD or USD/XX in your broker do the conversions for you when trading the majors (for example).

Somehow I've always assumed to convert and deposit in USD but it suddenly for some reason occurred to me that I don't need to. Are there any implications to this?
  • #2
  • Apr 10, 2014 11:13am Apr 10, 2014 11:13am
It is beeter having your base currency in your own countries currency. If you are not from the US by default you have a trade open by opting for an account in USD before you even open a trade.
  • #3
  • Apr 10, 2014 8:36pm Apr 10, 2014 8:36pm
Quoting mitch77
It is beeter having your base currency in your own countries currency. If you are not from the US by default you have a trade open by opting for an account in USD before you even open a trade.
That's interesting...I've never actually thought of it like that before
  • #4
  • Apr 10, 2014 9:28pm Apr 10, 2014 9:28pm
It depends on which quote currency you trade in the most. I find it's easiest and the most commission-saving if you fund your account in the quote currency that you trade most frequently in. For example, if you trade mostly the majors with quote currency in USD's like EU, GU, AU and NZ, then if you have funded your account in USD, once you close the trade, your profit will automatically be in USD and you won't have to do a conversion transaction and if your broker charges you commission for conversion transaction then you save on commissions as well. Even for brokers who don't charge you commission for conversion transactions, it would still yield you the most profit as many brokers don't convert profit to your funding currency right away and by the time when they do, you might suffer conversion losses due to the changed exchanged rate. Even if you trade in pairs with USD as the base currency like UJ, UC, you will only need to do ONE conversion transaction to convert them to USD and you won't even need to do any if your broker does them automatically for you. And you would only need to do ONE further conversion transaction ONCE when you need to convert them to your own country's currency when you need to withdraw your profit perhaps.

But it would be a different story if you fund your currency in your own currency of the country you live in. You would need to do always n+1 conversion transaction to convert them back to your own country's currency every single time when you trade unless your own country's currency is one of the quote currencies that you most frequently trade in.

That's my personal take. I trade mostly majors so I always fund my account in USD even though I am from Canada.
Make your losses in demo. Earn your profits live.
  • #5
  • Apr 10, 2014 10:40pm Apr 10, 2014 10:40pm
The base currency you choose doesn't have any impact on your trading or what pairs you trade, because forex accounts are margin accounts.

But if possible, you should choose a base currency the same as your home currency, because by doing that you avoid to large conversion spreads the banks charge when you do a wire deposit or withdrawal.

These conversion spreads are typically 2-3%. So for a 10k deposit you'll lose $200-300 on the deposit and the same for the withdrawal. In addition you might pay an extra $20 to $50 at the sending and receiving bank.

Credit cards and paypal charge a similar conversion spread. It's a large hidden fee often overlooked by traders, but it's the main way the financial institutions make their money.
  • #6
  • Apr 10, 2014 10:53pm Apr 10, 2014 10:53pm
Quoting SM02
The base currency you choose doesn't have any impact on your trading or what pairs you trade, because forex accounts are margin accounts. But if possible, you should choose a base currency the same as your home currency, because by doing that you avoid to large conversion spreads the banks charge when you do a wire deposit or withdrawal. These conversion spreads are typically 2-3%. So for a 10k deposit you'll lose $200-300 on the deposit and the same for the withdrawal. In addition you might pay an extra $20 to $50 at the sending and receiving bank....
Well I know ECN brokers would allow you to do a forex conversion transaction at market rate maybe for a commission so even though you pay a commission, there is virtually no spread and the commission would be a lot smaller than any conversion spread. And you just need to do this conversion ONCE BEFORE you withdraw your profit. And because the transaction amount is smaller than what you have in your account, you are not using margin so there is no roll-over interest. And then you just withdraw that amount that's already converted. I am not sure if you can do this with MM brokers though.

But if you have your account funded in your home currency, unless your home currency is the same as the quote currency of the pairs that you trade the most, every time when you trade, eventually you will have to convert back to your funding currency and if your broker charges you commission for this conversion transaction, then you pay an extra commission every time you trade and that could add up to a lot of commissions.
Make your losses in demo. Earn your profits live.
  • #7
  • Apr 10, 2014 11:55pm Apr 10, 2014 11:55pm
Quoting Forexia
{quote} Well I know ECN brokers would allow you to do a forex conversion transaction at market rate maybe for a commission so even though you pay a commission, there is virtually no spread and the commission would be a lot smaller than any conversion spread. And you just need to do this conversion ONCE BEFORE you withdraw your profit. And because the transaction amount is smaller than what you have in your account, you are not using margin so there is no roll-over interest. And then you just withdraw that amount that's already converted...
That's right. If you want to convert the money, get the broker to do it because the spread will be minimal. Although with a margin account it really doesn't matter what the base currency is, because the free margin available for trading will be updated real time using the current rates.

The really important point though is don't let the banks convert currency, because they'll pad the spread by 2 to 3% which is a lot of money.
  • #8
  • Apr 11, 2014 1:08am Apr 11, 2014 1:08am
Hey guys thanks for the replies.

I trade a huge variety of pairs (they're all on a larger TF if you're wondering) and they all range from majors to minors (excluding exotics). While majors only make up a minority of all the pairs I'm trading, I don't think it's important for the currency to be in USD?

Probably going with Pepperstone's standard account without any commissions so I think it's fine with the currency conversions in between.

They don't swap currency using spot rates and require banks to do the conversions which are pretty much terrible. Hence decided to post the question.
  • #9
  • Apr 11, 2014 1:57am Apr 11, 2014 1:57am
Great question!

Another angle, mooted by a mate of mine, is that it does not matter what the deposit currency is, as we trade in pips. We don't trade in the deposit currency (which is what you're calling the base currency). Base currency is the partner of the quote currency.
Interesting philosophy which will take away the pressure of emotions, IMHO .
  • #10
  • Apr 11, 2014 6:58am Apr 11, 2014 6:58am
Conversion fees are one thing to consider, loss in your account's purchase power over time if the account currency drops against your home (spending) currency is another one. Both shouldn't be overrated because usually they are both in the lower one-digit percentage range, an amount you easily can re-earn in a single month (supposed you run any kind of profitable strategy). I usually ignore them or trying to cut them short. My strategy itself has a much higher volatility, trying to save with conversion fees doesn't make much sense to me.

For me more important are broker commissions. Serious traders only trade commission based accounts to avoid being cheated. The commission rate changes with the account currency, the difference can be up to half a pip. Over time that's a lot of money to lose to the broker, even with medium term startegies.

For example commission rates with IC Markets differ significantly depending on the account currency:

USD account = USD7.00 = $7.00
GBP account = GBP5.00 = $8.32
EUR account = EUR5.50 = $7.56
CHF account = CHF6.60 = $7.44
AUD account = AUD7.00 = $6.47

With HFT group as IB:
USD account = USD5.50 = $5.50
GBP account = GBP3.70 = $6.16

Paying $8.32 or $5.50 per lot round turn is a difference of +51%. While the amount itself might look small you will realize the advantage when it comes to limit orders waiting for breakeven or a fixed amount of profit after fees. While one order is filled, the other ones waites for hours to get filled or isn't filled at all because of half a pip. Happens more often then you think.
It takes blood, sweat and enough tears to wash away the blood.
  • #11
  • Apr 11, 2014 12:26pm Apr 11, 2014 12:26pm
Quoting emmzett
Conversion fees are one thing to consider, loss in your account's purchase power over time if the account currency drops against your home (spending) currency is another one. Both shouldn't be overrated because usually they are both in the lower one-digit percentage range, an amount you easily can re-earn in a single month (supposed you run any kind of profitable strategy). I usually ignore them or trying to cut them short. My strategy itself has a much higher volatility, trying to save with conversion fees doesn't make much sense to me. For me...
Hi,

Interesting you brought up ECN. I'm currently quite new to this so do I exactly still do require to use an ECN account? What exactly do you mean by cheated?

And wouldn't it be $3.50 USD as stated here?
http://www.icmarkets.com/forex-tradi...account-types/
  • #12
  • Apr 11, 2014 2:15pm Apr 11, 2014 2:15pm
Quoting alfis
Hey guys thanks for the replies. I trade a huge variety of pairs (they're all on a larger TF if you're wondering) and they all range from majors to minors (excluding exotics). While majors only make up a minority of all the pairs I'm trading, I don't think it's important for the currency to be in USD? Probably going with Pepperstone's standard account without any commissions so I think it's fine with the currency conversions in between. They don't swap currency using spot rates and require banks to do the conversions which are pretty much terrible....
What's the quote currency of majority of the pairs that you trade? For example, in a currency pair of USD/CAD, the quote currency would be CAD and if you trade USD/CAD majority of the time, you should try to fund your account in CAD. So that way, as I explained before, when you make profit, the profit will automatically be CAD and no conversion would be needed. Even though you don't pay commissions in your Pepperstone standard account, the fact that they use bank rates to convert your profit that's not in your funding currency is just as bad as you having the bank to do the conversion and you are going to suffer conversion loss.

So even if your home country's currency is not CAD, at least you would minimize conversion loss by not having Pepperstone to have to convert your profit into your funding currency each time you trade. And if your home currency is NOT CAD, you just need to convert your profit to your home currency ONCE when you need to withdraw it.
Make your losses in demo. Earn your profits live.
  • #13
  • Apr 11, 2014 8:03pm Apr 11, 2014 8:03pm
Quoting Forexia
{quote} What's the quote currency of majority of the pairs that you trade? For example, in a currency pair of USD/CAD, the quote currency would be CAD and if you trade USD/CAD majority of the time, you should try to fund your account in CAD. So that way, as I explained before, when you make profit, the profit will automatically be CAD and no conversion would be needed. Even though you don't pay commissions in your Pepperstone standard account, the fact that they use bank rates to convert your profit that's not in your funding currency is just as...
I trade all majors/minors/crosses from EURUSD to CADCHF to EURAUD any anything in between totally around 24 pairs (besides exotics). Would it still be beneficial converting my currency to any kind?
  • #14
  • Apr 11, 2014 8:41pm Apr 11, 2014 8:41pm
Quoting alfis
{quote} I trade all majors/minors/crosses from EURUSD to CADCHF to EURAUD any anything in between totally around 24 pairs (besides exotics). Would it still be beneficial converting my currency to any kind?
I would fund the account with the quote currency of the pair that I trade most often even if I trade a variety of pairs like you. If there is absolutely not one currency pair that you trade most often that you REALLY trade all the pairs equally across the board, then it would make sense to fund your account in the currency of the country that you live in. You are going to be incurring conversion losses anyway when Pepperstone converts your profit, you might as well have them convert them directly to your home country's currency so at least you won't have incur another conversion spread with your own bank after you have withdrawn your profit.

In your case, it's really better that you trade with an ECN broker that converts your profit instantly and automatically using spot rate with no commissions otherwise you are incurring a lot of conversion losses. I heard IC Markets do that the last time I checked. Check them out if you want. You can even open up accounts with IC Markets through Introducing Brokers and you will save some commissions. I actually have an Introducing Broker that I can recommend to you; he's really good and knowledgeable about IC Markets and his rate is very competitive. Let me know if you want his name and email address.

Good luck!
Make your losses in demo. Earn your profits live.
  • #15
  • Apr 11, 2014 11:03pm Apr 11, 2014 11:03pm
Quoting Forexia
{quote} I would fund the account with the quote currency of the pair that I trade most often even if I trade a variety of pairs like you. If there is absolutely not one currency pair that you trade most often that you REALLY trade all the pairs equally across the board, then it would make sense to fund your account in the currency of the country that you live in. You are going to be incurring conversion losses anyway when Pepperstone converts your profit, you might as well have them convert them directly to your home country's currency so at least...
I'm not exactly too sure about ECN/STP and how their rates are calculated. When you say more conversion loss do you mean it's because of the wider pip spread of the pair that needs conversion back to my currency each time the trade is closed? And commissions are only paid for pairs which we open and not for the conversions needed back to my base currency?

Gotta download and check if their timezone is what I require. Anyway yes please do send me his information and I'll check it

Thanks!
  • #16
  • Apr 12, 2014 12:15am Apr 12, 2014 12:15am
Quoting alfis
{quote} When you say more conversion loss do you mean it's because of the wider pip spread of the pair that needs conversion back to my currency each time the trade is closed?
Yes

Quoting alfis
{quote} And commissions are only paid for pairs which we open and not for the conversions needed back to my base currency?
Well that will depend on the broker. Some ECN brokers will charge you commission for the actual trading AND the conversion transaction that you have to do to convert the profit back to your funding currency like Interactive Broker. Some brokers will charge you commissions ONLY and will convert your profit to your funding currency automatically and instantly using the spot rate free of charge like IC Markets. Some broker like LMAX will charge you commissions ONLY and will convert your profit to your funding currency automatically BUT not using spot rate; they don't necessarily use a bank rate but they will do it on a delayed basis like within certain days so you run some exchange rate risk. If in a certain days, the exchange rate actually moved to your favour then you gain on the conversion of your trading profit but if it moved against you in those certain day period, then you lose some of your profit.

Quoting alfis
{quote}Gotta download and check if their timezone is what I require. Anyway yes please do send me his information and I'll check it Thanks!
His name is Kyle and his email address is [email protected].

Good luck! Hope everything works out for you.
Make your losses in demo. Earn your profits live.
  • #17
  • Apr 12, 2014 4:44am Apr 12, 2014 4:44am
Quoting alfis
{quote} Hi, Interesting you brought up ECN. I'm currently quite new to this so do I exactly still do require to use an ECN account? What exactly do you mean by cheated?
No, you are not required to go the ECN way but it's highly recommended. Inform yourself about the different broker business modells, ie. how a broker/dealer makes money. Today most retail FX offers are dealers. If somebody offers a fixed spread without trade commission it's always a dealer, no matter what they say (NDD, STP, ECN). Fixed spread = a cheating criminal = typical conflict of interest between dealer and client. Fixed spreads are only possible by running a B-book against the clients, in the real world there are no fixed spreads. It means, your orders doesn't go to the market but sticks in the dealers book until matched or closed by you with a loss. The dealer is more interested if you lose then if you win because he earns his money with your losses. Variable spreads with commission fees mean the broker is interested in creating a lasting relationship with you because he makes money with your wins. So far for the theory, in practice there are mixed broker/dealers, too. FX criminals realized that it will help their reputation if they offer commission based accounts instead of 'fixed spread' ones, so they invented commission based accounts running against a B-book.
Quoting alfis
{quote}And wouldn't it be $3.50 USD as stated here? http://www.icmarkets.com/forex-tradi...account-types/
$3.50 half turn (position open), $7.00 round turn (position close), charged in full at position opening. Makes an additional 0.7-0.8 pip "spread".
It takes blood, sweat and enough tears to wash away the blood.
  • #18
  • May 2, 2023 9:27am May 2, 2023 9:27am
Hello, does anyone know, if the account currency has any impact on order execution speed?
  • #19
  • Edited 2:04am Apr 13, 2024 1:43am | Edited 2:04am
Quoting Forexia
{quote} What's the quote currency of majority of the pairs that you trade? For example, in a currency pair of USD/CAD, the quote currency would be CAD and if you trade USD/CAD majority of the time, you should try to fund your account in CAD. So that way, as I explained before, when you make profit, the profit will automatically be CAD and no conversion would be needed. Even though you don't pay commissions in your Pepperstone standard account, the fact that they use bank rates to convert your profit that's not in your funding currency is just as...
I'm considering to build a portfolio of diversified pairs, my account currency being USD. E.g. EURUSD, GBPUSD as main pairs, and AUDCAD, NZDCHF (for example) for diversification purposes. Though, wouldn't this diversification be flawed/only fictive, as profits made on AUDCAD and NZDCHF would be converted in USD anyway (more specifically conversions to/from CAD and CHF would be needed at entry/exit). Hence wondering if trading AUDUSD and NZDUSD wouldn't be equivalent, hence without possible diversification as all pairs would be USD related. Using IC markets and Eightcap as brokers. Any thoughts?
  • #20
  • Last Post: Jan 9, 2025 2:49pm Jan 9, 2025 2:49pm
Quoting Forexia
{quote} What's the quote currency of majority of the pairs that you trade? For example, in a currency pair of USD/CAD, the quote currency would be CAD and if you trade USD/CAD majority of the time, you should try to fund your account in CAD. So that way, as I explained before, when you make profit, the profit will automatically be CAD and no conversion would be needed. Even though you don't pay commissions in your Pepperstone standard account, the fact that they use bank rates to convert your profit that's not in your funding currency is just as...
Hey HI can someone help me I am going to start Forex trading with forex.com and what I trade is EUR/USD GBP/USD USD/JPY AUD/USD so if i choose my base currency as cad I would charge conversion fee everytime I trade right and If i set it as usd I would not face any conversion fee right? but if i want to withdraw my money to my cad bank account I would be charged a conversion fee probably and I can a withdraw using my debit card right??
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