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Funding trading account in EUR, for trading USD instruments (e.g MES)?
Hi guys,
I am a European trader, trading only the MES and ES. I am in the process of opening a new trading account. I can fund my new trading account in USD, but funding in Euro would also be possible.
Would there be any logical reason for me to fund my account in EUR?
If I want to trade the MES I need USD, so it seems to me much more logical to fund my trading account in USD (and pay the corresponding fees to my bank for the conversion from EUR to USD, and again from USD to EUR when I want to get money out of my trading account back to my bank account).
Otherwise, if I would use a EUR account to trade the MES, I would have to pay exchange fees for each single trade I guess (i.e. buying one MES contract requiring the broker to convert EUR in USD for that amount)?
So is there anyone using a trading account that is funded in currency X and trading instruments with this account that are based on currency Y?
Would that make sense at all? I would really like to understand the advantages/disatvantages in doing so, if it's possible at all.
Thank's, JM.
Can you help answer these questions from other members on NexusFi?
I'm also a European trader (Spain), and I also trade the MES with NinjaTrader.
I remember having the same dilemma back in the day.
What happened was I had to transfer (paying a commission) my capital in € to the broker's U.S. bank, and once it arrived, they converted it to $.
I can't recall if I've seen any figures in € since then.
Now, the capital on the platform appears in $, the account you log into also shows the balance in $ and you trade in $.
If you decide to make a withdrawal one day, you specify the amount, and they charge you another commission to transfer the money back to you.
Perhaps the most important or intriguing detail in all of this is that the figure of your capital in $ (which is actually and was originally in €) fluctuates and adjusts daily to the current EUR/USD exchange rate even if you haven´t traded the day before.
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In most (all?) cases a futures account will be multiple currency. Some/many brokers when they send you wire instructions will actually send them for multiple currencies (they are different) so that you can have balances in different currencies.
Regarding specifics I've run into this issue twice before, through two different brokers, once trading German Index contracts (EUR/€ denominated) and once the other trading YEN:USD futures (YEN/¥ denominated). In both cases in a USD/$ denominated account. When you open a position that has PnL & margin in a currency you do not have in your account your broker will also give you a balance in that currency. So in my case positive USD/$ balance and a negative EUR/€ or YEN/¥ balance. They will then charge you interest/funding on any of the negative balances. Once you close the position you will then have a residual PnL which is a function of trade PnL, exchange fees, and the broker funding charge. You can keep that in the that currency or ask the broker to convert it to your base currency.
