Non Account Currencies

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Hi

I can't seem to find the info I'm looking for through searching. I was hoping someone could direct me to a good explanation of the below

My account currency is GBP. I want to trade EUR/USD. I understand the maths to calculate everything I need for price per pip and margin calcs

What I don't understand and can't find a good answer to is. Am I now effectively trading two pairs? (EUR/GBP and EUR/USD). As I understand it the fluctuations in the eur/GBP rate could cancel out any profit on the eur/USD trade. 

Am I missing something? If the above is correct it's virtually impossible to trade a pair with no matching account currency without assessing the price data of the two pairs.  

If someone could point out the correct terminology for what I'm struggling with or a good article that resolves this I would be very thankful. Searching non account pairs etc isnt getting me anywhere. I know I'm probably not searching the right terms.



 
it is a trading system called arbitrage, you may search or ask anyone who know that
 
Sze Shing Fong:
it is a trading system called arbitrage, you may search or ask anyone who know that

It has nothing to do with arbitrage.


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Non Account Currencies

toma4186, 2021.08.25 14:20

Hi

I can't seem to find the info I'm looking for through searching. I was hoping someone could direct me to a good explanation of the below

My account currency is GBP. I want to trade EUR/USD. I understand the maths to calculate everything I need for price per pip and margin calcs

What I don't understand and can't find a good answer to is. Am I now effectively trading two pairs? (EUR/GBP and EUR/USD). As I understand it the fluctuations in the eur/GBP rate could cancel out any profit on the eur/USD trade. 

Am I missing something? If the above is correct it's virtually impossible to trade a pair with no matching account currency without assessing the price data of the two pairs.  

If someone could point out the correct terminology for what I'm struggling with or a good article that resolves this I would be very thankful. Searching non account pairs etc isnt getting me anywhere. I know I'm probably not searching the right terms.





This is normal and it can affect the performance of a trading strategy. To what extend mostly depends on how long positions are held. There is no solution as the currencies need to be converted anyhow whether you convert your GBP to EUR for an EUR account (and possibly back when you withdraw), or trade EUR/USD pairs with a GBP account.

 
Sze Shing Fong:
it is a trading system called arbitrage, you may search or ask anyone who know that
Thanks for the reply but arbitrage isn't what I'm trying to achieve. 

I want to trade EUR/USD with a GBP account. I don't understand if the price of EUR/GBP is equally as important to me as the EUR/USD price. 

Maybe I am seeing this wrong but I am now thinking I need to stick to pairs which contain GBP. Otherwise I am constantly gambling on the exchange rate of the account currency and base currency
 
toma4186:
Hi

I can't seem to find the info I'm looking for through searching. I was hoping someone could direct me to a good explanation of the below

My account currency is GBP. I want to trade EUR/USD. I understand the maths to calculate everything I need for price per pip and margin calcs

What I don't understand and can't find a good answer to is. Am I now effectively trading two pairs? (EUR/GBP and EUR/USD). As I understand it the fluctuations in the eur/GBP rate could cancel out any profit on the eur/USD trade. 

Am I missing something? If the above is correct it's virtually impossible to trade a pair with no matching account currency without assessing the price data of the two pairs.  

If someone could point out the correct terminology for what I'm struggling with or a good article that resolves this I would be very thankful. Searching non account pairs etc isnt getting me anywhere. I know I'm probably not searching the right terms.



No you are not trading two pairs. And in your example EURGBP has nothing to do.

EURUSD will give you profit/loss in USD, it will then be converted to GBP using GBPUSD rate. It's a conversion not a trade, and it can not "cancel out any profit".

 
Enrique Dangeroux:

It has nothing to do with arbitrage.




This is normal and it can affect the performance of a trading strategy. To what extend mostly depends on how long positions are held. There is no solution as the currencies need to be converted anyhow whether you convert your GBP to EUR for an EUR account (and possibly back when you withdraw), or trade EUR/USD pairs with a GBP account.

Thank you for the clarification. Are you saying that short timeframe trades are less likely to be affected by account/base currency price moves? 


 
Alain Verleyen:

No you are not trading two pairs. And in your example EURGBP has nothing to do.

EURUSD will give you profit/loss in USD, it will then be converted to GBP using GBPUSD rate. It's a conversion not a trade, and it can not "cancel out any profit".

Thanks for your help. 

Sorry I do understand the EUR/GBP not being relevant. That was a mistake. 

My confusion comes from the fact that the GBP/USD rate could move in between trade opening and closing therefore affecting p/l. Could you point out the flaw in my thinking? 
 
toma4186:
Thanks for your help. 

Sorry I do understand the EUR/GBP not being relevant. That was a mistake. 

My confusion comes from the fact that the GBP/USD rate could move in between trade opening and closing therefore affecting p/l. Could you point out the flaw in my thinking? 

Of course GBPUSD rate is always moving.

It only means that trades with the same profit in USD (say 100 USD), could depending of GBPUSD rate leads to 72.89 GBP profit (rate = 1.37200) or 72.56 GBP profit (rate = 1.37825) or...

The time you keep your position open doesn't matter at all, what matters is only the GBPUSD rate at the time your position is closed.

 
Alain Verleyen:

Of course GBPUSD rate is always moving.

It only means that trades with the same profit in USD (say 100 USD), could depending of GBPUSD rate leads to 72.89 GBP profit (rate = 1.37200) or 72.56 GBP profit (rate = 1.37825) or...

The time you keep your position open doesn't matter at all, what matters is only the GBPUSD rate at the time your position is closed.

Are saying that the exchange rate is not relevant for opening but only for closing a position? I always thought it was for both.

 
Enrique Dangeroux:

Are saying that the exchange rate is not relevant for opening but only for closing a position? I always thought it was for both.

How would GBPUSD be relevant to open an EURUSD position ?

It's not, you trade on margin and swap. EURGBP will matter for the margin, GBPUSD will matter for the swap (so in the sense how long you keep the position matters, but it's not related to the topic).

 
Alain Verleyen:

Of course GBPUSD rate is always moving.

It only means that trades with the same profit in USD (say 100 USD), could depending of GBPUSD rate leads to 72.89 GBP profit (rate = 1.37200) or 72.56 GBP profit (rate = 1.37825) or...

The time you keep your position open doesn't matter at all, what matters is only the GBPUSD rate at the time your position is closed.

I'm sorry but I'm still not clear on this. I can't see how we don't end up being susceptible to the GBP/USD rate on the total units traded both when opening and closing the trade. I don't understand why you only calculate this on the profit/loss amount. 

Is it due to us only converting the margin amount and not the full amount of units traded when we enter and exit trades?
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