FX issues trading US markets with AUD

[dheath]

Hi all,

I have been trading US stocks for about a year now, I use Halifax as a broker and have my funds in their account in $AUD, they are quite cheap on commission as far as I've Seen.
However with the AUD fluctuating against the US dollar so much I'm finding sometimes its helpful other times I make a larger loss when stopped out due to the FX risk.

Does anyone know of a way of neutralizing the difference, I would prefer not to leave Halifax as they are very reliable and I only pay $13 in and out for US stocks.

Thanks,
Duane.

 

[weasel]

Hi all,

I have been trading US stocks for about a year now, I use Halifax as a broker and have my funds in their account in $AUD, they are quite cheap on commission as far as I've Seen.
However with the AUD fluctuating against the US dollar so much I'm finding sometimes its helpful other times I make a larger loss when stopped out due to the FX risk.

Does anyone know of a way of neutralizing the difference, I would prefer not to leave Halifax as they are very reliable and I only pay $13 in and out for US stocks.

Thanks,
Duane.

Hold funds in $USD, then hedge the account balance value through the spot market. You will see gains/losses in the hedge position but you'd have effectively locked in the exchange rate so you know exactly what your account is worth in $AUD when you decide to withdrawal later.

That, or an alternative would be to use a broker that caters to such trading in other currency denominated markets. InteractiveBrokers, for instance will convert the currency on the fly as you make your stock transaction, and they'll do it at their 'IdealPro' exchange rates so you're not getting bent over by paying a marked up 'bank wholesale' rate. Then managing exposure is easy since you'll see the total exposure you have in $USD and can make an offsetting currency transaction right after the trade.

Though, you don't need a broker like IB to do this, you can split it up between a good forex broker and a good US equity broker. Just gotta tie up capital in both to do it effectively.

Or just embrace the currency risk and realize that there's probably the same chance it will work for you as it works against you. Unless you have some strong opinion or bias in the underlying exchange rate.

 

[dheath]

Thanks.

D.