FX risks with CFDs pairs trading???

[mimmox]

Hello all, I read so many papers/opinions about stocks pairs trading and CFDs but one thing remains unclear to me: are you exposed to currency risk when you go short and long at the same amount in two stocks in the same currency, say GBP, when your account is in a different currency, say EUR???

I think that you have no such risk on your equity but you have currency risk when you convert your gain/loss at the end of the holding period when you close out both positions. My colleague thinks we are exposed to currency risk on our equity, not only on our potential loss or gain.

I will be happy to hear your comments on this! I haven't started trading yet, so I am not sure how the process works on the platform when you invest in stocks denominated in different currencies. Thanks!

 

[yellowfloyd]

You are exposed to currency risk if you are trading stocks that are quoted in dollars and if you have a sterling account etc.

To avoid this, you can set up a dollar account for US stocks, and Sterling for UK stocks etc most brokers will allow you sub accounts to do this.

 

[NVP]

Hello all, I read so many papers/opinions about stocks pairs trading and CFDs but one thing remains unclear to me: are you exposed to currency risk when you go short and long at the same amount in two stocks in the same currency, say GBP, when your account is in a different currency, say EUR???

Try to minimise risk by not doing this ........or just accept the risk .......if you then overlay currency hedging to protect your position you are adding further costs and risks to the initial and raw risk on the core trade ........

N