Question about account currency types

Hello,

I have a question about creating accounts in different currencies. I know that if I have one in CAD vrs USD that the gains/losses will be in that respective currency. However I am not sure how far it goes beyond that.

Are there individual trade affects? Will an EA behave differently? Will the margin requirements be different? Optimizations will not be affected I think since it never asks for which currency when optimizing.

I have been using USD for the last year and a half but I live in Canada and now I think it is best to use CAD rather than the USD.

Any help or a point in the right direction would be very helpful.

Thanks!

The short answer is [I]no.[/I]

Everything that happens in your trade (whether manual or EA) from the moment of entry to the moment of exit depends on interaction between the base currency and the quote currency — regardless of what your account currency happens to be.

Your account currency becomes involved [I]before your trade is actually entered,[/I] when margin is set aside; and [I]after your trade is exited,[/I] when profit or loss is converted from the quote currency to your account currency.

Example:

Let’s say your account is denominated in USD, and you open a trade in GBP/JPY. As soon as you click ENTER, your platform will determine whether you have adequate UNUSED MARGIN in your account to support the trade you want to enter; and if you do, the platform will then “set aside” that margin amount, putting it temporarily out of your reach for the duration of your trade. That margin is [I]accounted for in cash,[/I] in your account currency (USD).

While your GBP/JPY trade is running, profit (or loss) occurs [I]in pips,[/I] which are fractions of one unit of the quote currency (yen, in this case). Your platform continuously converts yen-pips to USD at the current USD/JPY exchange rate, in order to keep you informed of your [I]open P/L[/I] position. This conversion is a bookkeeping step, which does not affect your trade in any way.

When you exit your trade, your [I]open P/L[/I] (until now reflected in equity) becomes [I]closed P/L[/I] reflected in your account balance.

No. Your EA doesn’t care what currency is used to post required margin, or what currency is used to book profits (or losses).

The [I]margin percentage[/I] (which is related to the account leverage offered by your broker) [I]will remain the same[/I] (although margin percentages can vary from one trade to the next, [I]depending on the currency pairs traded[/I]).

When a trade is entered, the notional value of that trade (in terms of the base currency) will be converted to your account currency — say, USD — and the applicable margin percentage will be applied to that USD-figure.

Example:

Let’s say that your account is denominated in USD, and you enter a 1-lot GBP/JPY position. Your platform will convert the notional value of 1 lot of GBP/JPY (which is 100,000 GBP) into USD, at the current GBP/USD rate, and then apply the applicable margin percentage to that USD-amount. If GBP/USD is currently 1.3870, and the applicable margin percentage is 2%, then required margin on this trade will be [B]$2,774[/B] (that is, 100,000 x 1.3870 x 0.02 = 2,774).

If your account is denominated in CAD, a similar calculation (which you can confirm) will yield a margin requirement of [B]C$3,746[/B] (based on the current GBP/CAD price of 1.8730).

[I]Different-looking, but equal, dollar-amounts[/I] — based on the round numbers used in the example.

If you live in Canada, then presumably your whole life (both personal and professional) is basically “denominated” in CAD. Therefore, if your broker offers accounts denominated in CAD (not all brokers do), then [I]it certainly makes sense to have a CAD-denominated forex account.[/I]

.

Does not affect your orders or trading but as a Canadian earning a living in Canada I often end up with brokers that do not support CAD accounts. In other words, I am effectively longing USDCAD if I decide to deposit into a USD account or EURCAD if I deposit into a EUR account.

The irony of this is that I sometimes end up in a situation where I am shorting USDCAD or EURCAD in my terminal XD.

I am constantly debating with myself about when I should make a deposit because of this. Maybe an expert will clarify my reply for you.

I don’t think there is crucial difference in which currency you hold your account, I use USD on my all accounts, its main currency and its less affected by market fluctuations.

Thanks to everyone for the replies. Originally the broker did not support CAD but now they do. From now on I will be only using CAD dominated accounts.

Thank you Clint for your excellent response, you have gone above and beyond. I will refer back to this post many times in the future no doubt.

Thanks all!