trading with IB and currency exposure

E

edward22245

I have a brokerage account with the IB and by base currency is USD.

When I fist started trading things from EUREX, IB asked me to select two options regarding the fx exposure - could someone explain what the differences are? I don't remember which I selected but my EUR balance changes after each trade - the profits and losses are accumulated in Euros.

I want to reduce currency risk so do I convert the pnl (euros) into USD after each trade? or is it better to do it just once at the end of every month? I only make 1-2 trades a day and the commisiosn are also taken in euros.
 
First check your virtual FX Position (TWS->Account): should be 0 or none. Otherwise close this position using IDEALPRO as destination.
With USD as base currency, you can convert your EUR balance using FXCONV once it is over a threshold. This threshold depends on your risk aversion. Might be EUR 5000 or EUR50,000 or whatever.
 
I don't have anything in the virtual FX position. (only 'real fx balance' but what are the difference?)

So is reducing currency risk worth the commission I need to pay in order to convert the euro to dollars?

Also, is it better to do the conversion after a fixed amount (eg 5,000 EUR) of pnl or after a fixed time period (e.g. every 5 trading days or every month)
 
Your IB account is a multi-currency account. The so-called "base currency" is only used for the monthly reports you receive. So you'll end up with multiple cash positions, in multiple currencies, after you trade outside the US. IB will not automatically do currency conversions for you. It is up to you what you want to do with cash positions in currencies other than USD. Be aware that you will receive interest on positive cash positions, and pay interest on negative cash positions. IB has an overview of the interest rate for each currency: https://www.interactivebrokers.com/en/accounts/fees/pricing-interest-rates.php

edward22245 said:
I want to reduce currency risk so do I convert the pnl (euros) into USD after each trade? or is it better to do it just once at the end of every month? I only make 1-2 trades a day and the commisiosn are also taken in euros.
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You could close any foreign currency cash position after each trade. Or you could only do this after you have closed a position, and have received the profit of that trade, which will of course also be in that foreign currency. Or you could consider this foreign currency cash position as another investment position, and close it at a time which seems best to you. Beware that the currency conversion does not come for free: you are being charged a commission for this conversion as IB considers this a trade.
 
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