My first GBP/USD trade with IB

[lmz4005]

Hi , I am new here,
I am originally French living in Australia with Aussie wife and kids working full time.
I have been investing the Australian Equity market for 6 years with success.
However, after taking the course for the CFA I now feel it is not important to diversify over less correlated assets: me thinking currencies, futures.

MY QUESTION FOR TODAY:
I want to put a long trade in GBP/USD. Interactive Brokers does not allow because account in AUD.
Option 1: would two trades as follows works?
Long GBP/AUD
Long AUD/USD
Option 2: Use CFD on GBP/USD which IB seems to allow. Not sure of the underlying consequences.
I have put a CFD trade in the paper account to see how t works.

Any thoughts/insights/comments would be greatly appreciated as I am sure some of you have been through this before!

Thanks
Laurent

 

[minwa]

You seem a bit confused about what you're actually trading.

For option 1 you state you wish to trade currency futures, there is no such thing as GBPAUD futures. Even if there is, all futures are priced in US dollars (unless you trading on Euronext or TSE instead of CME) so it would not make a difference by opening one first to allow another - if you can open one you can open them all.

For option 2 you can trade the CFD, but as far as I know there is no leverage for most Aus retail accounts, it would be like doing a conversion on your account cash. If you don't have/mind any of those limitations on your account then CFD is a good option.

 

[lmz4005]

Thanks for your reply minwa.

In option 1, I meant 2 long cash currency trades (gbp/aud=buy GBP + aud/usd=sell USD) rather than futures on the spot rate...

Not sure if this is the same as a CFD trade on GBP/USD??? I do understand the interest rate fees charged on CFD account maybe offset-ted (?) by the lesser capital involved in holding the underlying currencies...

 

[minwa]

For most intents and purposes yes the CFD is a cash currency position in IB, in the OTC (broker own liquidity pool) market. CFDs should allow trades regardless of what base currency is - if you had trading permissions, which you likely don't unless you opened overseas/non personal account.

Your inability to trade (like me) is most likely because of Aus regulations crippling IB's retail forex trading. No quotes, no margin, no opening of speculative positions.




I hold both USD and AUD in my account and it does not allow me to open GBPAUD or GBPUSD positions.

Solution is trade the futures or find a different broker.