Interactive Brokers account setups

[diliff]

Hi guys,

I have a feeling the information IS out there on the forums somewhere, but I've tried to find it and it is difficult to pinpoint, so I wanted to ask a couple of questions in the hope that it all could be summarised.

I'm looking at signing up to IB for real time streaming quotes and trading. At the moment (as mentioned in another thread), I'm using Westpac Broking and Quotetracker as an interim solution, but a much better trade execution/streaming quotes system is becoming more and more important, as Westpac's site is simply useless for quick entries/exits.

Firstly, for the time being I'd be interested in trading the ASX but I'm also interested in NASDAQ, but I'm not sure exactly how it would work. If I sign up to IB, and transfer some money from my Aus bank account to them, will it/should it be converted to USD or left as AUD? Can I trade both markets with AUD or do I have to have separate cash accounts with AUD and USD for both markets? And if I need just the one currency, how does it work? If my account only has AUD and I buy stocks on the NASDAQ exchange, will my AUD be converted to USD at the prevailing rate and then converted back again when I sell stocks? And if so, doesn't this introduce significant currency exchange fees? How best can I trade both markets in this situation? It confuses me.

Also, does anyone have any particular recommendations a trading setup (charting/execution software) for day trading/swing trading on these markets that is better than Quotetracker? I like the fact that it is free, and so far I have been living with the limitations of that product, but if there are persuasive justifications for upgrading to better software, I'm all ears. Particularly, a good, simple solution for scanning stocks for simple indications would be a worthy reason. I've looked at the demo of Ninjatrader (looks powerful execution-wise but a bit unwieldly for charting?), and also Amibroker and Metastock, but really, what I'm looking for is personal experience with them and their interface, as ease of use is just as important as how powerful they are - no use being powerful if you struggle to harness it.

Anyway, I know this has ended up being pretty verbose but hopefully I can get some advice and personal experiences to contrast the sales pitches and technical info their respective websites give you. Even just a quick "I've tried a few but I like 'abc' the best as it does x, y and z." or something would be handy.

Thanks.

 

[Nick Radge]

If I sign up to IB, and transfer some money from my Aus bank account to them, will it/should it be converted to USD or left as AUD?

Your choice. I leave mine in AUD but transfer any P&L back to AUD at month end if required.

Can I trade both markets with AUD or do I have to have separate cash accounts with AUD and USD for both markets?

You can trade any market using any currency base. You can also change your currency base anytime.

If my account only has AUD and I buy stocks on the NASDAQ exchange, will my AUD be converted to USD at the prevailing rate and then converted back again when I sell stocks?

The currency doesn't get converted. You open up a position in US$ which is then offset by the AUD funds. You will incur/receive funding costs on open US positions but interest will be offset to some degree by the interest earned on unused AUD funds.

And if so, doesn't this introduce significant currency exchange fees?

.
No. The exchange rates are basically the inter bank rates as opposed to retail exchange rates. The major risk is currency movement risk if you hold large US positions whilst the USD sinks. Over time it will work for and against you. I used to do 65% of my trading in the US when the AUD was plunging through 50c, so its swings and roundabouts longer term. Just sweep the funds back at the end of each month to the base currency (assuming your not holding long term positions)




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[diliff]

The currency doesn't get converted. You open up a position in US$ which is then offset by the AUD funds. You will incur/receive funding costs on open US positions but interest will be offset to some degree by the interest earned on unused AUD funds.

Right.. What exactly do you mean by funding costs though? What are they comprised of? Are you essentially borrowing money at the margin rate when you open a position in foreign currency?

No. The exchange rates are basically the inter bank rates as opposed to retail exchange rates. The major risk is currency movement risk if you hold large US positions whilst the USD sinks. Over time it will work for and against you. I used to do 65% of my trading in the US when the AUD was plunging through 50c, so its swings and roundabouts longer term. Just sweep the funds back at the end of each month to the base currency (assuming your not holding long term positions)

So essentially the exchange rate spread is negligible and as long as there is no major swing while you hold the position, it won't have a significant effect on the trade? I don't intend to hold many long term positions but will keep that in mind if I do.

I don't know exactly how the IB system works yet obviously, not having signed up yet, but I assume it is quite simple to manage the funds using their website/java software?