I opened an account with Saxo Bank London to trade Forex. I was surprised to see my leveraged buying power at half of what I have with my US brokers (both are 100:1) It seems they convert my USD deposit to GBP, then give me leverage on that smaller amount. I not sure how/why they do this. It seems like they will lose lots of US customers. Anyone have a similar experience?
I really think you should close the account with Saxo. Anyone on this board who trades forex knows they are very likely to nickle and dime you. Theres pleny of horro stories on here of thos who lost money with them due to misquotes and the like. Do a search and youll see. Perhaps www.interbankfx.com or www.interactivebrokers.com as alternatives. The leverage at the former is better. I dont want to be accussed of schilling so ill mention at least 2 good brokers.
Ahhh I feel like I am going crazy. My broker (Saxo) is now telling me that all brokers, even US brokers will first convert your account balance to GBP if you are trying to go long GBP. I have been trading forex for a few years and I always thought I could open a position with full leverage. For example, if I had a $1000 account with 100:1 leverage, technicaly shouldnt I be able to buy $100,000 of GBP/USD? Saxo Bank is telling me the most I could buy with 100:1 leverage is $51,000 since GBP is the base currency. ????????
That's correct and standard. Your notation is a bit off... the max position you could have is about £51.000 (not $51,000), which is equivalent to $100,000 at current GBP/USD rate of ~1.95. You are getting the full 100:1 leverage. With $1,000 account and 100:1 leverage, you can have an up to $100,000-valued position in any currency pair. Whether USD/--- 100,000 (where "---" stands for any other currency) or GBP/--- 51,000 or EUR/--- 77,000 or AUD/--- 129,000 and so on. All rounded at current exchange rates. Except for that first amount, USD/--- 100,000, all those will vary with rates over time. In general, Leverage = total position value / account NAV (where account NAV = account balance - unrealized P&L) Both values in that Leverage formula -- total position value and account NAV -- can be denominated in any currency you want, as long as it's the same one. By definition, GBP/USD is denominated in £, not $ (unlike your $ account). Neither the base currency of the account nor the broker's country has any bearing on maximum leverage. Makes sense?