I have a quick question about base currencies. I have USD as my base currency, so would it not be a good idea to trade currencies that do not pair with USD? When I buy say, EUR/JPY, it will convert my USD to JPY so I could buy EUR, and when I sell it back, it will convert my JPY back to USD. Doesn’t this essentially mean that I am making two different trades with just one position? (Primary trade: EUR/JPY Conversion trade: USD/JPY) For example, if I make a losing trade on EUR/JPY, and at the time I close my trade USD/JPY went down a few pips, will I be losing twice?
Yeah, it does, but if your whole economic existence is based in USD,meaning that you shop in America, buy products in America, then it would not make a difference…
The P&L figuring is definitely easier trading USD pairs if you’re in a USD account, but you should trade the pair(s) with which you feel most comfortable.
When I buy say, EUR/JPY, it will convert my USD to JPY so I could buy EUR, and when I sell it back, it will convert my JPY back to USD. Doesn’t this essentially mean that I am making two different trades with just one position? (Primary trade: EUR/JPY Conversion trade: USD/JPY) For example, if I make a losing trade on EUR/JPY, and at the time I close my trade USD/JPY went down a few pips, will I be losing twice?
When you trade forex you never “convert” the money in your account to anything. It’s just a surety deposit against potential losses. If you’re going long EUR/JPY then you are effectively borrowing the JPY and converting that in to EUR. At the end of the trade you’re paying back the JPY loan and whatever is left is converted into USD as your gain or loss.
Yes, there is an adjustment based on the movement of the USD relative to what you’re trading. It will, however, only alter the magnitude of the gain or loss. It will never turn a gain into a loss or vice versa.
Your question is a little tricky because you have used a double negative.
Restated…
[B]I have USD as my base currency, so would it be a good idea to trade currencies that pair with USD?[/B]
I have AUD as my base currency.
I use the GFT platform and [U]all the calculations[/U] are done and displayed on screen by the computer as I trade - margin, equity, profit loss etc.
What profit/loss I see in my floating profit/loss window is what I get should I immediately close the trade.
With this handy setup, I can trade any pair at all.
