Flattening out your account...

C

cipherscribe

Any brokerage account will begin with a set currency. If your in the UK, and you deposit your funds into the account, you will have x amount of GBP.

Say you see that USD/GBP Is hitting support and you think you can make a profit by converting your GBP into USD, then transferring back again when it hits resistance. Your account size is 30k GBP so you convert all that into USD, which will give you about 48,300 USD (1.61).

A week later, after the USD has increased, and the rate is now 1.54 , and you think it's at resistance, you decide you want to sell out your position. You sell the entire load of 48,300 USD back into GBP, leaving you with a nice tidy proft. Total Equity size is about 31,300 GBP. You have made 1,300 GBP in a week.

But say you wanted to hedge against both USD and GBP - you moved to the US, and are now spending USD, so you don't want to see your equity diminish in either USD or GBP. With all your funds now in GBP, any further upswing to the USD will see your equity (in terms of USD ) diminish.

Would the most obvious solution - to have half your equity in GBP and the other half in USD, be the right answer, or is there an alternative that will provide a better safe-haven?

Thanks!

Adrian
 
If you trade foreign product which noted in other currencies, than yours on your account -- you always have to pay the currencies converting costs........

Doesnt matter if you trade FX, or US stocks, if you are having your account in GBP --- so long you are doing winning trades, you make money, and the few commission are really not worth to think about, they are just commissions.........IMO
 
Quote from cipherscribe:

Any brokerage account will begin with a set currency. If your in the UK, and you deposit your funds into the account, you will have x amount of GBP.

Say you see that USD/GBP Is hitting support and you think you can make a profit by converting your GBP into USD, then transferring back again when it hits resistance. Your account size is 30k GBP so you convert all that into USD, which will give you about 48,300 USD (1.61).

A week later, after the USD has increased, and the rate is now 1.54 , and you think it's at resistance, you decide you want to sell out your position. You sell the entire load of 48,300 USD back into GBP, leaving you with a nice tidy proft. Total Equity size is about 31,300 GBP. You have made 1,300 GBP in a week.

But say you wanted to hedge against both USD and GBP - you moved to the US, and are now spending USD, so you don't want to see your equity diminish in either USD or GBP. With all your funds now in GBP, any further upswing to the USD will see your equity (in terms of USD ) diminish.

Would the most obvious solution - to have half your equity in GBP and the other half in USD, be the right answer, or is there an alternative that will provide a better safe-haven?

Thanks!

Adrian
More...

I have a similar issue, if I am understanding you correctly. My account with FXCM is in US dollars, but I live and spend in Canada. Naturally, I want to preserve the Canadian dollar buying value of my US account.

You are currently LONG on the GBP. So, purchase a contract of equivalent value that SHORTS the GBP with respect to the US dollar. This will cancel out the currency risk with a modest fee.
 
Thanks Bhardy for your reply.

I posted this on another forum and received very limited responses. I'm not sure whether it's my poor description of the situation, or whether people don't really understand the risks in their own accounts with having a single currency. Perhaps you only really consider these types of things if you happen to have your feet in two places at once, and want to mitigate risk in both places.

I think this is like the Alpha and Beta of risk right? And it works in Currencies AND in all products.

If you day trade the ES, for example, getting flat only moves you from risking $$$ to Risking Opportunity. It's the same risk right, if you see your goal as being to maximise your trading capital?

Being 'Flat' in your own currency (or Base Currency as IB calls it), makes your account look like it's standing still, but relative to other currencies, you could be risking alot more than you think. Your never really 'Flat'. Ever. The best you can do is perhaps hedge in many currencies.

Adrian
 
Quote from oldtime:

no kidding, there is no such thing as cash anymore, you are always long or short something
More...

Oldtime, Nice brevity. Said the same thing I did in one sentence! :-)
 
Quote from cipherscribe:

Oldtime, Nice brevity. Said the same thing I did in one sentence! :-)
More...

:-)

Still, you've drawn attention to something which was discussed in a previous thread.

You can always organise your trades so that your trading in whatever currency you want. ( with a fee )

For example: I like to trade gold. Gold is priced in US dollars. What if I want to trade Gold in Canadian dollars. Simple; enter a matching trade that shorts the US dollar and longs the Canadian dollar.
 
Quote from bhardy307:

:-)

Still, you've drawn attention to something which was discussed in a previous thread.

You can always organise your trades so that your trading in whatever currency you want. ( with a fee )

For example: I like to trade gold. Gold is priced in US dollars. What if I want to trade Gold in Canadian dollars. Simple; enter a matching trade that shorts the US dollar and longs the Canadian dollar.
More...

Top Tip! Thanks.

Have a link to the other discussion?

Adrian
 
Quote from bhardy307:

I have a similar issue, if I am understanding you correctly. My account with FXCM is in US dollars, but I live and spend in Canada. Naturally, I want to preserve the Canadian dollar buying value of my US account.

You are currently LONG on the GBP. So, purchase a contract of equivalent value that SHORTS the GBP with respect to the US dollar. This will cancel out the currency risk with a modest fee.
More...

Hi bhardy307,

With your FXCM account, you can avoid the USD currency risk by converting your USD account to a CAD denominated account. You can do this online at http://www.fxcm.com/manage-forex-account.jsp, just login and select, "Add an Account".

You can email me at jrogers@fxcm.com if you have any questions.


- Jason
 
Quote from Jason Rogers:

Hi bhardy307,

With your FXCM account, you can avoid the USD currency risk by converting your USD account to a CAD denominated account. You can do this online at http://www.fxcm.com/manage-forex-account.jsp, just login and select, "Add an Account".

You can email me at jrogers@fxcm.com if you have any questions.


- Jason
More...

Hi Jason,

Yes, thanks, I am aware of that option. I debated this but decided I would rather trade USD denominated products in a USD account.

Is there by any chance a way to link my mini and micro account under one login? I'd really like to be able to transfer money between the two accounts. Certain trades I'd rather do in the micro account. I just opened the mini account a couple of days ago to trade the CFDs; I still need to fund it and will shortly. Credit card company needs to process my payment first.

Can I get a permanent demo account to test my strategies designed with the Strategy Trader?

Thanks,
Bruce
 
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