Cross-currency-pairs: double risk, as margin needs to be converted?

[harryschmidd]

Hi,
I’m from Austria and would like to trade the Obawanga strategy in GBP/USD, but the margin I pay on my account would be in EUR.
Therefore my question:
The spread seems to be a bit higher, but still ok. But is it possible to just use EUR margin for a GBP/USD-trade? That would be fine, I wouldn’t have to mind the EUR/USD-prices at that trade.

Or are the EUR first converted to USD, then I do my trade, and if I clear my position the USD are converted back to EUR? So it would depend on the EUR/USD-conversion rates if I make additional gains/losses? Than it would be no good idea to do cross currency trades.

Thanks

[rhodytrader]

I’m from Austria and would like to trade the Obawanga strategy in GBP/USD, but the margin I pay on my account would be in EUR.
Therefore my question:
The spread seems to be a bit higher, but still ok. But is it possible to just use EUR margin for a GBP/USD-trade? That would be fine, I wouldn’t have to mind the EUR/USD-prices at that trade.

Or are the EUR first converted to USD, then I do my trade, and if I clear my position the USD are converted back to EUR? So it would depend on the EUR/USD-conversion rates if I make additional gains/losses? Than it would be no good idea to do cross currency trades.

Your margin should be based on the EUR value of the position you take and will be denominated in EUR. It may fluctuate while the trade is on (check with your broker on the specifics) as the value of the position changes, but it’s not a question of your EUR being converted into GBP or USD. Your profits/losses, however, are another story. A loss cannot be converted to a gain or vice versa, but it can be increased to decreased based on the rate movements.