How does one get Flat?

[adrianjm]

Some background:

I have an IB account with a Base Currency of EUR. I am trading the EUR/AUD and have been enjoying the recent drop from 1.4. I am thinking around this area of 1.3 - 1.32 has some support, and I want to get flat.

My position size is the size of my account - no leverage.

So currently my $$ are in AUD currency. How do I sell out of the position without going Long Euros, and potentially losing against the AUD should the EUR continue to decline? What do most people do in this position? Do they hedge, and just spread their $$ over the 2 currencies - so in essence I'd sell half my AUD's for Euros?

Or is there another way? Or do most people never get 'flat', just tumble their cash across whatever currency pair looks promising at the time?

I'm new to this stuff - equities and indexes have been my focus and never really looked into currencies.

Thanks !

Adrian

 

[jiggly]

Some background:

I have an IB account with a Base Currency of EUR. I am trading the EUR/AUD and have been enjoying the recent drop from 1.4. I am thinking around this area of 1.3 - 1.32 has some support, and I want to get flat.

My position size is the size of my account - no leverage.

So currently my $$ are in AUD currency. How do I sell out of the position without going Long Euros, and potentially losing against the AUD should the EUR continue to decline? What do most people do in this position? Do they hedge, and just spread their $$ over the 2 currencies - so in essence I'd sell half my AUD's for Euros?

Or is there another way? Or do most people never get 'flat', just tumble their cash across whatever currency pair looks promising at the time?

I'm new to this stuff - equities and indexes have been my focus and never really looked into currencies.

Thanks !

Adrian

you should be able to just close the position and realise your profit. speak to your broker if you do not know how to do this on their platform.

 

[adrianjm]

I don't think I have explained myself very well.

Sure I can simply Close the position, as you say, but where does that leave me? Back in Euros, exposed to any Euro downside.

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.

Going back to the previous example, 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?

Apologies for the verbosity!


Cheers,

Adrian