Interactive Brokers: Sell AUD/USD vs. Buy USD/AUD

[jdninbrisbane]

Hi - Novice question regarding currency conversion in an Interactive Brokers $US share trading account funded with $A.

Have seen the IB IdealPro beginners video at http://ibkb.interactivebrokers.com/taxonomy/term/78 but am confused by the relationship between Buy vs Sell in reference to Transaction versus Settlement currency.

i.e. If I transfer $A into the IB account and want to convert it to $US, do I
Sell AUD.USD, or
Buy USD.AUD?

What's the difference between those two transactions?

Likewise, when I want to convert the $US back to $A to bring it home, do I
Buy AUD.USD, or
Sell USD.AUD?

Regards,
JD

 

[jdninbrisbane]

OK, have been tinkering in the demo account that IB provides and I *think* the answer is that the currency pairs run in one direction only, so the quantity bought/sold (the transaction currency as IB calls it) will, in this case, always be $A as the pair appears to be aud.usd.

That is, there is no option to sell usd.aud, it'll always be buy aud.usd

 

[TulipFX]

If you have AUD and want USD you

sell: AUD and buy USD = sell AUDUSD




If you have USD and want AUD you

buy: AUD and sell USD = buy AUDUSD

Is that the answer to the question you were asking?

 

[Trembling Hand]

If you have AUD and want USD you

sell: AUD and buy USD = sell AUDUSD




If you have USD and want AUD you

buy: AUD and sell USD = buy AUDUSD

Is that the answer to the question you were asking?

No thats not right. If you want to buy US shares just buy them. IB does the conversion for you. When you close out the trade you will have a profit or loss in US dollars thats when you convert it back into AUD.

 

[jdninbrisbane]

If you have AUD and want USD you

sell: AUD and buy USD = sell AUDUSD




If you have USD and want AUD you

buy: AUD and sell USD = buy AUDUSD

Is that the answer to the question you were asking?

Thanks. I believe so. It's consistent with the outcome of the tinkering I did in the demo account.

 

[jdninbrisbane]

No thats not right. If you want to buy US shares just buy them. IB does the conversion for you. When you close out the trade you will have a profit or loss in US dollars thats when you convert it back into AUD.

Is that the auto-established margin loan that IB refers to creating when securities are purchased in a currency that the account doesn't hold?

http://ibkb.interactivebrokers.com/node/722

 

[TulipFX]

No thats not right. If you want to buy US shares just buy them. IB does the conversion for you. When you close out the trade you will have a profit or loss in US dollars thats when you convert it back into AUD.

Not sure if that was the answer he wanted, but what I said is correct. I don't know about share trading, was just trying to answer a conversion question.

 

[bellenuit]

OK, have been tinkering in the demo account that IB provides and I *think* the answer is that the currency pairs run in one direction only, so the quantity bought/sold (the transaction currency as IB calls it) will, in this case, always be $A as the pair appears to be aud.usd.

That is, there is no option to sell usd.aud, it'll always be buy aud.usd

Yes, you are correct. There is only one currency pair for each possible currency trade. There is an aud.usd, but no usd.aud.

The first currency in the currency pair is known as the Transaction Currency. The second currency is known as the Settlement Currency.

Ticker AUD.USD are trades of the Australian Dollar. The trade price will be the cost to Buy or proceeds of a Sell of 1 Australian Dollar. The currency following the “.”, USD in this case, is the currency used to purchase the Australian Dollars for a Buy or the currency of the proceeds for a Sell of Australian dollars.

So if you want to convert Australian dollars to US dollars, you do a SELL of AUD.USD. If you want to convert US dollars to Australian dollars, you do a BUY of AUD.USD.

 

[Trembling Hand]

Is that the auto-established margin loan that IB refers to creating when securities are purchased in a currency that the account doesn't hold?

http://ibkb.interactivebrokers.com/node/722

jdninbrisbane Do you want to trade US stocks or FX?