Which currency for my trading account AU or US?

[Reyjay]

I have a question about selecting the currency for my trading account. I'm based in Australia and have deposited my funds into Oanda as Australian dollars. This seem to makes sense at the moment as the AU is very strong, but what happens when the AU tanks? The $ per pip value goes down as well, right? As the AU is at a 23 year high, would it make more sense to convert my $AU into $US, thereby benefiting from a favourable exchange rate and positioning my account to maximise on a stronger $US future when compared to the $AU?

Admittedly this approach assumes the $AU will tank, relative to the $US, sometime soon. Economists are saying the AU will continue to perform strong for the rest the FY due to demand for AU resources. But it will drop and stay below the US at some stage.

Anyway, any insights would be welcomed.

Thanks

 

[Rhody Trader]

If you have your account in USD you are making a long-term bet on the direction of AUD/USD. As a new trader (which it sounds like you are), you're probably not in a good position to be making those kinds of calls. Beside, you're bookkeeping will be much simpler if you keep the account in your home currency.

 

[Reyjay]

Thanks John.

Fair enough. But ignoring my new trader status just for the moment, is the premise of what I'm saying correct? I understand assessing the market correctly for such a turn around is beyond me at this stage. I'm just interested in knowing if the logic holds up.

So, should the $US make a come back and the $AU sit below it's current parity it would make sense to trade in $US to maximise returns and not get hit with a poor exchange rate when converting back into $AU?

Thanks again

 

[shewolf]

Since the USD is the base currency of the aud/usd pair, then if you keep your funds in aud's then you will be charged a conversion fee each time you trade. Each time you trade, your aud's have to be converted to usd's. Because your trade has to be in the base currency.
At least this is what my broker firm does. Does any other broker do it differently?

 

[Rhody Trader]

So, should the $US make a come back and the $AU sit below it's current parity it would make sense to trade in $US to maximise returns and not get hit with a poor exchange rate when converting back into $AU?

If you expect the USD to appreciate meaningfully against, then sure, it makes sense to have your account in USD.

 

[Rhody Trader]

Since the USD is the base currency of the aud/usd pair, then if you keep your funds in aud's then you will be charged a conversion fee each time you trade. Each time you trade, your aud's have to be converted to usd's. Because your trade has to be in the base currency.
At least this is what my broker firm does. Does any other broker do it differently?

Definitely. Most brokers base your margin on the value of your position in terms of your account currency regardless of whether that's the quote or base currency in the pair, or you're trading a cross that doesn't have your account currency in it. In the latter case there's a secondary conversion of your gains/losses.

 

[shewolf]

Definitely. Most brokers base your margin on the value of your position in terms of your account currency regardless of whether that's the quote or base currency in the pair, or you're trading a cross that doesn't have your account currency in it. In the latter case there's a secondary conversion of your gains/losses.

I am trading gbp/usd. I have my account funded in gbp's.

Are you saying that, each time I buy or sell a gbp/usd trade, I don't need to convert my margin deposit for that trade from gbp to usd's?
Or when they take the margin deposit from my account, don't they need to change it from gbp's to usd's?

 

[Rhody Trader]

I am trading gbp/usd. I have my account funded in gbp's.

Are you saying that, each time I buy or sell a gbp/usd trade, I don't need to convert my margin deposit for that trade from gbp to usd's?
Or when they take the margin deposit from my account, don't they need to change it from gbp's to usd's?

Not with most brokers. For example, I trade with Oanda. If I trade USD/JPY my margin isn't converted to JPY. It's in USD. Even with a cross like EUR/GBP my margin is still in USD.

 

[forexmidi]

hold in the currency in Cator you comfortable! It is shopping rather than a bank account, and here we have to work.