Interactive Brokers for Forex?

[tripletrade]

Hello,

I would appreciate some feedback from those who use IB for forex. I noticed they won in T2W's 2011 best forex broker category so I am thinking of opening an account with them and using Ninja Trader.

My first question has to do with what I understand are amounts left over in different currencies from trades. I have heard that after doing trades in various currencies your EUR denominated IB account will most likely have, for example, US500, AUD700, CHF400, GBP800, NZD900 etc as amounts which then need to be converted back into your base EUR account currency or whatever other currency your account is in. Is this a source of extra commission costs and is it a hassle or are those who use IB happy with this?

When I do trades with my current broker everything is converted from CHF, GBP, AUD, USD, etc to my base EUR account currency when I complete the trade. I don't have to concern myself with having various currencies from different trades accumulate in my account over time.

Secondly, for tax reporting, can I just get a statement showing opening and closing balances or P&L for the year without showing the number of trades or total value of trades? There are certain tax implications in my country of residence if a broker's statement shows a high level of trading activity versus simply showing how much was gained or lost on the account during the tax year. If it shows a lot of trades or high trade value (averaging 30 or more standard lots daily) the tax percentage could be very different. For example, one broker I use gives a statement that just shows that your profit was X for the year and your opening and closing balance. It doesn't show the numberof trades or their total value for the year.

Any feedback would be greatly appreciated.

 

[gc1]

Yes, you do get left over with small amounts in different currencies. Very small amounts (less than about $1 I think) are automatically converted without commission, otherwise you can either carry the balances forwards and convert them when/if you want (any pay a commission to convert them) or convert them after each trade (which is an extra expense).

Yes it is a bit of a hassle.

For some pairs you can avoid the small amounts left over by having different buy and sell quantities. E.g. trade EUR/USD, buy 100,000 and sell 101,000 to realise your profit in euro (1,000) instead of usd (1,300 or whatever) - but this means the sell quantity depends on the sell price so you have to recalculate it (or have some code to automatically do this for you).

You can get a statement for the whole year - but is has a separate section for each currency and commissions in the base currency. It will detail every trade made. There is a single "base currency" summary figure but it will include any unrealised gains + losses on the account non base currency amounts over the year so it probably won't be a figure usable for a tax return without some adjustment.

One advantage compared to other "brokers" is you can do real currency conversions, so if you need some $ or £ or JPY etc., for a real purpose you can get the conversion done at a much better rate than going to a bank.