Trading US stocks in the UK question

[Kenzor]

Hello all,

To start, I have recently been studying all sorts of information about trading stocks, in particular I want to day trade US OTC stocks. I have read all the relevant 'Essentials' stickies and I'm in the process of creating my trading plan. I have also purchased a series of DVDs (40+ hours worth) that solely cover US stocks. I'm currently ploughing through these with alot of enjoyment.

My problem is that I have come to a fork in the road where I'm a little confused on currency conversions when it comes to US stocks. For exmaple if I wanted to open a live account with £1000 and the exchange rate was ~1.4 GBP to USD, would I be starting with ~$1400 in my account? Do brokers convert this way or am I missing something? Also if I wanted to bank transfer my profits would it be reconverted to my currency? Am I better off trading UK penny stocks instead?

Sorry if these are fairly newbie questions, I've been paper trading in USD with SureTrader which will probably be my go-to broker when I decide to go live, mainly due to the PDT rule.

Regards, Kenzor

 

[Elisium]

Which DVDs did you purchase? Sykes?))
Which broker do you plan to choose? I mean, which broker allows so low deposit to open an account?

 

[Kenzor]

Which DVDs did you purchase? Sykes?))
Which broker do you plan to choose? I mean, which broker allows so low deposit to open an account?

I have Sykes DVDs and Nate's Textbook Trading. I'm pretty sure SureTrader has a low deposit requirement, I could be wrong as I have only been paper trading with them so far but I think their minimum is $500.

 

[Elisium]

I have Sykes DVDs and Nate's Textbook Trading. I'm pretty sure SureTrader has a low deposit requirement, I could be wrong as I have only been paper trading with them so far but I think their minimum is $500.

Right! I forget it, sorry.

 

[Kenzor]

Right! I forget it, sorry.

No problem Any idea how currency is converted?

 

[Kenzor]

Nobody knows? Still looking for an answer

 

[malaguti]

Nobody knows? Still looking for an answer

you would be better off asking your broker exactly how they handle it, however there really can only be two scenarios
they hold your funds in a currency denominated account
they convert your funds for each occasion

either way, you are always at some point going to convert surely?
even held in USD, you will want to withdraw at some point. even if you have a USD account in the UK, you will still convert. its just a question of when
I can't see how this could be a fork in the road for you

but like I say, if suretrader is where you are going to go, ask them

 

[Kenzor]

you would be better off asking your broker exactly how they handle it, however there really can only be two scenarios
they hold your funds in a currency denominated account
they convert your funds for each occasion

either way, you are always at some point going to convert surely?
even held in USD, you will want to withdraw at some point. even if you have a USD account in the UK, you will still convert. its just a question of when
I can't see how this could be a fork in the road for you

but like I say, if suretrader is where you are going to go, ask them

Thank you for your input.
I was more confused about the actual conversion rate than 'if' they convert for you, do they exchange based on the current rate/do they take commissions for converting?

 

[malaguti]

Thank you for your input.
I was more confused about the actual conversion rate than 'if' they convert for you, do they exchange based on the current rate/do they take commissions for converting?

my apologies then Kenzor as your questions really did sound like "if"
anyway, that aside, then the specific mechanism really is down to the broker, but one would imagine it would be a spot rate (which they have probably added on) and I'm pretty sure they would love to charge you for any sort of additional service on their part. I would have thought, like most brokers their commission is not necessarily on the conversion but a higher commission rate on US stock purchase rather than the domestic ones

The UK broker I use charges twice as much for a US purchase and will convert at the rate in question for the day and doesn't charge for that, but the rate is often not comparable to the same currency chart for that pair!

 

[Kenzor]

my apologies then Kenzor as your questions really did sound like "if"
anyway, that aside, then the specific mechanism really is down to the broker, but one would imagine it would be a spot rate (which they have probably added on) and I'm pretty sure they would love to charge you for any sort of additional service on their part. I would have thought, like most brokers their commission is not necessarily on the conversion but a higher commission rate on US stock purchase rather than the domestic ones

The UK broker I use charges twice as much for a US purchase and will convert at the rate in question for the day and doesn't charge for that, but the rate is often not comparable to the same currency chart for that pair!

Do you mind me asking which broker you use? I am still very much in the early stages of learning everything there is to know, but as times goes on I am swaying more towards trading on UK markets rather than overseas. But as long as the strategy I'm learning works in those markets also, I cant see it would be much different although I have heard the US penny stock market is much larger.

 

[malaguti]

Do you mind me asking which broker you use? I am still very much in the early stages of learning everything there is to know, but as times goes on I am swaying more towards trading on UK markets rather than overseas. But as long as the strategy I'm learning works in those markets also, I cant see it would be much different although I have heard the US penny stock market is much larger.

For the UK I've been using two (due to compensation and to spread risk)
iweb and selftrade..their costs are low if you just want to trade UK

For other markets I use
Charles Stanley and Hargreaves Lansdown as their range of products is excellent (primarily though Iweb and Charles Stanley depending on what I'm trading)

I'm looking at interactive brokers as they also provide data which I need for backtesting, however their customer service is woeful and they charge high fees for UK shares so I may not bother with them

I don't ever trade penny shares so I wouldn't know I'm afraid as I'm only interested in nicely trending (historically of course) shares and you need an element of volume for those, so its always typically been FTSE350

hope that helps, and good luck

 

[Mr. Charts]

interactivebrokers has been perfect for me since I joined them 14 years ago, though I agree with malaguti about their customer service.
I trade US stocks for a living and some occasional FX
The conversion $USD/GBP is done automatically every two minutes at no charge.