What is a multi-currency account? What is it for and what does it affect? What currency is better to open a forex trading account? You’ll find the answers to these and many other questions in this article.
Multi-currency accounts were developed and introduced to provide more trading opportunities and facilitate the process of trading in financial markets. They have a number of advantages over the common dollar accounts. Of course, the biggest advantage is that you can any moment benefit from the sharply changing market situation. The rates of particular currencies can change very quickly, and if you have a trading account in several currencies you can instantly transfer your funds between accounts and make profit from changes in currency rates.
When, for example, you expect that a currency of a certain account to go down in value, you may transfer your funds to another account, opened in a safe-haven currency at that very moment. Simply put, you protect yourself from sharp currency price swings or take an advantage from these swings.
Nowadays, there are even particular trading strategies that suggest managing multiple currencies from one account.
The article covers the following subjects:
What currencies do brokers provide to open trading accounts?
As a rule, brokers provide accounts maintained in the most popular and stable currencies.
U.S. dollar (USD)
The U.S. dollar is currently the most traded currency both in forex and in the world in general. Therefore, this currency dominates, traded in the most liquid currency pairs in forex. Dollar is also the so-called safe haven asset that is a financial asset is an investment that is expected to retain or increase in value during times of market turbulence. As the dollar is included in most currency pairs, it is most reasonable and convenient to open an account in this currency; it will be convenient for you to calculate major parameters of your trades, such as risk, deposit, margin. The main equation, we have all known since the basic course of foreign exchange trading, is 1 USD = 0.1 lot. It helps you quickly figure out a risk and a target profit. But it works only when the account currency is USD. In cases with other currencies, you’ll have to apply a much longer formula to calculate the value of one lot, so, it will take you more time.
British pound sterling (GBP)
In general, the British pound is a quite stable and strong currency, but there is an important detail for trading through an account in this currency. It is far more complicated to calculate major parameters of money management than for dollar accounts. Of course, trading accounts in GBP are far more convenient for people who live in the UK and whose main means of everyday payments is the British pound. Or, it will suit those who execute the majority of their trades in this currency and expect its value to increase substantially.
(EUR) Euro (EUR)
Trading accounts in the euro are better for those who live in the Eurozone and use mostly this currency; or for those who are going to visit the EU countries in the near future, as it will be more relevant to withdraw your money from the account in this currency. The euro accounts can be also applied by traders who are going to hedge against the financial risks, associated with foreign payments in this currency and subsequent conversion to another currency. As for calculation risk parameters for trading the euro, the difference is not that big as the rates of the euro and the dollar do not much differ and might become equal in the near future.
Swiss franc (CHF)
In addition to major features of trading accounts in this currency, similar to other currencies, CHF perfectly suits traders who apply conservative strategies. It may be so, because the Swiss franc is thought to be the most stable currency, which is least vulnerable to sharp price swings. So, if your strategy suggests low risk and stability you may choose this account type.
Russian ruble (RUB)
Of course, ruble accounts mostly suit traders who live in the Russian Federation, in the so-called ruble area. People who live in Russia receive their income in rubles, and so, their payments are also in rubles. They don’t need other currencies in everyday life. And of course, they need sometimes convert the ruble to buy other currencies when there are going to foreign countries. But it is rather rare occasions, than everyday activities. If you trade in Forex, you in any way need to convert rubles to dollars when you top up your account and dollars to rubles when you withdraw your profits from the account. So, you lose quite much money as commission costs. If you have a ruble account, you will avoid those costs. If you deposit small sums to your trading account, it is more convenient to make calculations in rubles, so that you can quite easily manage your lot size.
If you compare accounts in dollars and in rubles, you will see a number of key points:
- When you trade through a ruble account it is far easier to make major calculation.
- The funds on your account don't depend on the rate changes, as you won’t have to convert the money means.
- You see the dollar and the ruble in different ways, from a psychological point of view. 1000 ruble is quite an amount, and you know how much is 1000 rubles, what you can buy for it, and so you estimate it, based on this. But see 14 dollars in no clear way. You can’t right away estimate how much is 14 dollars. Therefore, it is easier for you to lose 14 dollars than 1000 dollars, in emotional terms. That is why ruble accounts are more conservative and get you to be a more disciplined trader; and self-discipline is a key to trading success.
Millibitcoin (MBT)
A millibitcoin (millibit) is one thousandth of bitcoin. The decimal of a popular cryptocurrency appeared because bitcoin is rather expensive in dollar terms, it is a few thousand dollars per coin. There are hardly any people, interested in economy, who haven’t heard about Bitcoin cryptocurrency or about the stories of people who made a fortune on its rise.
Currently, Bitcoin is quite popular, though its popularity peak has been already over. For example, LiteFinance broker provides quite a wide range of trading instruments, based on major cryptocurrencies; and, of course, it is far more convenient to trade digital assets if your account is in cryptocurrency.
How do you open an account in a particular currency?
In this part of the article, I’ll explain how you can open a multi-currency account.
To open a trading account, you need to open your client’s profile and click on the METATRADER tab on the left menu.
2. Once the window opens, you click on the OPEN ACCOUNT at the bottom of the main window.
3. There will be a tab to Open trading account, and you adjust a number of parameters. The first of them is the Account type.
4. Next, you choose the amount of financial leverage that you’ll use on your new account
5. After that, you can select the currency of the new account in the Currency menu. It can be:
U.S. dollar - USD
Euro - EUR
Russian ruble - RUB
Swiss franc - CHF
Millibitcoin - MBT
6. After you’ve selected the needed currency, the account in the new currency will appear; in the given example, it is MBT.
7. Now, you can either top up your account or make an internal transfer from your other account, that is nominated in another currency, in the given case, it USD.
8. In the next box, you enter the amount you want to transfer to the new accounts.
9. Next, you specify the account you where you want to transfer the money.
10. After that, you only need to click on the TRANSFER button.
11. When you transfer is complete, there will be the amount of money you’ve transferred, but it will be in the currency of the new account.
12. To be able to trade through the new account, you need to Turn it into main, by clicking on the corresponding button.
13. To start trading, you go back to the Trading tab.
14. There, you select the instruments you want to trade. In the given case, it is cryptocurrencies, as the new account is in MBT.
15. At the bottom of the terminal screen, you see the new account and it is ready for executing trades.
In conclusion, I’d like to add that most often everything depends on your trading strategy. If it based on the calculations in a particular currency, your account currency will depend on this. If you haven’t yet figured out your risk limit and it is difficult for you to calculate it, if you can, you’d better choose your local currency, or the currency of your wallet, so that you’ll better understand how much you are risking and what’s the reason. And of course, if you are working to develop your own universal trading strategy and want to consider all the peculiarities of trading process, you obviously should utilize multi-currency accounts to diversify your balance in different currencies so that you can have better performance on your account.
P.S. Did you like my article? Share it in social networks: it will be the best "thank you" :)
Useful links:
- I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe.
- Use my promo code BLOG to get a 50% deposit bonus on the LiteFinance platform. Simply enter this code in the appropriate field when funding your trading account.
- Telegram chat for traders: https://t.me/litefinancebrokerchat. We are sharing the signals and trading experience.
- Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders https://t.me/litefinance
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
