Question about hedging deposite fund

[skyoo8]

Hi guys, I am new to Forex trading. I am looking for a good broker to start with.

I find out that some broker only accept USD as deposite fund. I am in UK. So, I am wondering that do I have to hedge my deposite fund by long GBP/USD as much as I deposite. Or I'd better find a broker that allow me to deposite GBP?

Thank you for your help!

 

[scose-no-doubt]

get short gbp/usd in notional size equal to your deposit or there are some options and futures you could usebut these are a bit more complex. You'll have to look at the cost:benefit of each so it all hinges on how much you want to deposit... I think.

 

[skyoo8]

get short gbp/usd in notional size equal to your deposit or there are some options and futures you could usebut these are a bit more complex. You'll have to look at the cost:benefit of each so it all hinges on how much you want to deposit... I think.

Thank you for your reply. But I you sure I should short GBP/USD? Cause I already shorted GBP/USD by convert my GBP to USD. Should I long GBP/USD to hedge this position?

I am new, so please explain if I am wrong. Thank you.

 

[scose-no-doubt]

By exchanging currencies you've essentially gone long and are hoping for appreciation. By going short in the same amount you're locking in currency exchange at that rate you get filled. Any appreciation you get on the money deposited will be negated by losses on the short position and any losses on what's deposited will be covered as the short position moves into profit. That's the hedge.

Problem is, If you need to keep the short position open you're likely to suffer some sort of financing cost or some other form of transaction cost e.g option premium.

Can you not just transfer money into the account as and when you need it rather than depositing the lot?

 

[Rhody Trader]

Hi guys, I am new to Forex trading. I am looking for a good broker to start with.

I find out that some broker only accept USD as deposite fund. I am in UK. So, I am wondering that do I have to hedge my deposite fund by long GBP/USD as much as I deposite. Or I'd better find a broker that allow me to deposite GBP?

My first suggestion is that you find a UK-based broker, or one that does accept GBP to make things much simpler.

My second suggestion is that if you're new you shouldn't be putting very much money in your account to start, and thus the value of hedging will be minimal.

 

[skyoo8]

Thank you guys, I think I know what to do now. Thanks for advise.