"Trading" by Changing Account Currency

Aloha Traders,

Myronn Saremo, who created what appears to be a very good trendline trading system, Advanced strategy #10 (Trend Line Trading Strategy) | Forex Strategies & Systems Revealed, wrote here, Advanced strategy #10 (Trend Line Trading Strategy) | Forex Strategies & Systems Revealed, “I was fortunate to open Live account in USD so that is good for me as AUD is getting a severe beating.”

That made me wonder: Is it wise for one to try to “trade” by converting one’s account currency to one that is gaining over it, then trade it to another when that is gaining beyond that one, etc.? That, of course, will only work if one eventually converts it back to currency he can spend, and assuming it will be greater in worth than the currency he began with.

I’m not about to try it, if I ever will be! But I’d like to hear your thoughts on it - pardon me! - if you’re talking from knowledge!

Thank you,
Norm

Very interesting.

I guess its a form of arbitrage because it works by taking advange of the exchange rate and the difference in pricing of 2 brokers?

It never ceases to amaze me how many strategies traders will employ ranging from simple to very advanced and sophisticated.

I’ve even heard of traders that had success using things like astrology and migration patterns of certain wildlife.

Fascinating.

Ola Senor,

Yes, if done for the hope of gain, it is. I’ve done some thinking about it.

The main difference between that and normal forex trading is that in normal forex you risk a chosen percentage or dollar amount of your account and can place a stop loss, but changing the currency in one’s account is putting the whole account on the line in a single “trade” with no stop loss available. I don’t get the impression from Myronn’s quote that he did it intentionally to come out ahead, but for some other reason. Nevertheless, he obviously came out ahead.

Take care,
Norm

Hey Norm.

This thread has been very thought provoking. A few things came to mind I want to bounce off you.

I have no knowledge or experience with this type of strategy, so at the expense of possibly make a fool out of myself, here are some things that came to mind.

You mentioned the AUD was taking a beat down and the trader benefited by opening an acoound in USD.

  1. Does that mean he was long on the AUD/USD and an account in USD acted as a hedge.

  2. Or was he short on the AUD/USD and trying to compound gains by having an account in USD.

  3. Or was he strictly exchanging currencies and not trading?

You also mentioned trying to benefit by converting to a currency that is gaining over another currency, repeating this process untill finally you are able to convert to your original currency for a net gain.

  1. If the AUD/USD is falling because the USD is gaining in relation to the AUD, depending on the situation, why not just short the AUD/USD.

Example:

Lets say the USD and the AUD are both strengthening but the USD is gaining in relation to the AUD. In that situation, its probably better to convert from AUD to USD currency because the net gain would be greater than simply shorting the AUD/USD by virtue that you remove the AUD from the equation.

Or would that even make a difference because the net difference in value of the 2 currencies remains the same regardless?

On the other hand, if the USD is gaining big time in relation to the AUD because the USD is strengthening and the AUD is weakening at the same time, wouldnt it be better to just short the AUD/USD. The net gain would be greater because you benefit from both the rising dollar and falling australian dollar as opposed to just benefiting from a strong USD.

Or would the net gain be the same regardless if your trading or just exchanging currencies?

I know there are many other factors involved and please forgive my ignorance on the subject.

Hi Pancho,

I’ll respond within your text IN CAPS:

Hey Norm.

This thread has been very thought provoking. A few things came to mind I want to bounce off you.

I have no knowledge or experience with this type of strategy, NEITHER DO I. so at the expense of possibly make a fool out of myself, here are some things that came to mind.

You mentioned the AUD was taking a beat down and the trader benefited by opening an acoound in USD. THAT’S WHAT MYRONN SAID.

  1. Does that mean he was long on the AUD/USD and an account in USD acted as a hedge.

  2. Or was he short on the AUD/USD and trying to compound gains by having an account in USD. I DIDN’T GET THE IMPRESSION HE WAS TRYING TO GAIN BY CHANGING HIS CURRENCY, BUT THAT HE DID IT FOR SOME OTHER REASON. TO COMPARE IT TO A NORMAL FOREX TRADE, IF HE EXPECTED AUD TO DROP IN RELATION TO USD, HE WOULD BE GOING SHORT.

  3. Or was he strictly exchanging currencies and not trading? THAT WAS MY IMPRESSION.

You also mentioned trying to benefit by converting to a currency that is gaining over another currency, repeating this process untill finally you are able to convert to your original currency for a net gain. I WONDERED ABOUT IT, BUT BASED ON MYRONN’S EXPERIENCE, IT CAN BE DONE IF ONE MAKES THE SWITCHES AT THE RIGHT TIME.

  1. If the AUD/USD is falling because the USD is gaining in relation to the AUD, depending on the situation, why not just short the AUD/USD? IN A NORMAL FOREX TRADE, YOU’D WANT TO RISK ONLY A PORTION OF YOUR ACCOUNT; BUT BY SWITCHING ACCOUNT CURRENCIES, YOU’D BE SOCKING THE WHOLE SHEBANG INTO YOUR BET. IN A NORMAL FOREX TRADE, MOST PEOPLE WOULD SET A STOP LOSS, BUT BY SWITCHING ACCOUNT CURRENCIES, THERE’S NO STOP LOSS AVAILABLE.

Example:

Lets say the USD and the AUD are both strengthening but the USD is gaining in relation to the AUD. In that situation, its probably better to convert from AUD to USD currency YES because the net gain would be greater than simply shorting the AUD/USD by virtue that you remove the AUD from the equation. HOW COULD IT BE REMOVED FROM THE EQUATION? WHETHER YOU GO THE NORMAL FOREX WAY OR SWITCH ACCOUNT CURRENCIES, YOU’RE STILL HOPING ONE CURRENCY GAINS IN RELATION TO THE OTHER. I TRIED TO CONVEY THE TWO POSSIBLE WAYS OF DOING IT (1. NORMAL FOREX, AND 2. CHANGING ACCOUNT CURRENCIES.) I REALLY DON’T KNOW THAT I COULD ADD ANYTHING.

Or would that even make a difference because the net difference in value of the 2 currencies remains the same regardless? IF THE CURRENCIES RETAIN THE SAME RELATIVE VALUE IN RELATION TO EACH OTHER, WHICH WOULD BE VERY UNLIKELY, THEN THERE WOULD BE NO NET GAIN OR LOSS.

On the other hand, if the USD is gaining big time in relation to the AUD because the USD is strengthening and the AUD is weakening at the same time, wouldnt it be better to just short the AUD/USD. The net gain would be greater because you benefit from both the rising dollar and falling australian dollar as opposed to just benefiting from a strong USD. THE GAIN WOULD BE MUCH GREATER BY EXCHANGING CURRENCIES, BUT YOUR WHOLE ACCOUNT WOULD BE ON THE LINE INSTEAD OF, FOR EXAMPLE, 2% OF YOUR ACCOUNT.

Or would the net gain be the same regardless if your trading or just exchanging currencies? SMALL RISK, SMALL PROFIT OR LOSS. RISK YOUR WHOLE ACCOUNT, TREMENDOUS GAIN OR YOU’LL LOSE YOUR &8^$!

I know there are many other factors involved and please forgive my ignorance on the subject.

THE WHOLE CONCEPT IS NEW TO ME ALSO. I JUST THOUGHT IT WAS WORTH THINKING THROUGH TO GROW IN GENERAL UNDERSTANDING OF TRADING CONCEPTS. MOST IMPORTANTLY, I, FOR ONE, AM NOT ABOUT TO TRY IT. MUCH TOO RISKY! AND I WOULD ADVISE OTHERS NOT TO TRY IT UNLESS THEY REALLY - I MEAN, REALLY - KNEW WHAT THEY WERE DOING!

TAKE CARE,
Norm

Thanks for clearing that up for me Norm.

You’re welcome, Pancho.

Happy and careful trading,
Norm