Noob question about FX on IB

P

Pete S

Hi all. I'm a reasonably experienced stocks/options trader on the IB platform. I've been investigating doing FX trading and mostly have my head around everything. I have a paper trading account which I've been using for experimentation.

There's one thing I don't quite get. Obviously, you don't want to be placing orders which get routed to IDEAL. The minimums for IDEALPRO are listed as follows (sorry for bad formatting):

Underlying Minimum Maximum
AUD 30,000 7,000,000
CAD 27,000 6,000,000
CHF 30,000 7,000,000
EUR 18,000 4,500,000
GBP 13,000 3,000,000
HKD 200,000 45,000,000
JPY 3,000,000 700,000,000
MXN 250,000 60,000,000
SEK 175,000 50,000,000
USD 25,000 6,000,000

These numbers appear to be in contracts, not dollar value. If I want to trade, for example, EUR.USD, this is fine, because there's a roughly 1.5 multiplier. However, if I want to trade EUR.JPY, the contract price is around 150. Any order I put in for less than 18000 contracts gets routed to IDEAL. This means the minimum dollar value of the trade is 2.7 million dollars.

I must be missing something here, as this doesn't seem right to me. Any help appreciated, thanks.
 
Hi,

The minimum and maximum amounts quoted do actually refer to the amount of currency rather than number of contracts.

The amount refers to the currency of the base of the pair of currencies. Thus you shouldn't think of it as just AUD - like it would be for a future. It is a pair of currencies - AUD/USD. If you were to go long one lot in AUD/USD you would be buying 100 000 Australian dollars and simultaneously selling the equivalent value of US dollars at the time of the trade - so if the exchange rate were .9000 you would be selling 90 000 US dollars.

If you went short in EUR/JPY you would be selling Euros and buying the equivalent amount of Yen. Thus it is important to bear in mind that you are always trading a pair of currencies.

IBs margin system is a little complicated because it depends on what base currency you account is in, compared to what pair you are trading - but it is approximately up to 50X leverage if you account base currency is one of the pair, and 20X leverage if your account currency is not one of the pair.

There is a lot of information out on the internet about the basics of forex trading. The Oanda webiste may be of some help to you:

http://www.fxtrade.com/learn/basics/
 
You may want to try trading FX Futures on Globex.

Very liquid and easy.

I could never figure out Ideal and Ideal pro.

Add EUR > Futures > Mar 2008 or Jun

JPY

CAD

GBP
 
Quote from xyannix:

You may want to try trading FX Futures on Globex.

Very liquid and easy.

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More...

I agree - the FX futures are much better - faster execution as well.

Only problem is the liquidity can get very thin on non-majors outside of US trading hours.
 
Thanks for the response BigFunky. That's what I was missing -- the position value is shown in a different currency.
 
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