As you can see on the bottom of my chart I’ve uploaded, I bought in on Apple at 121.19, and the stock is now 123.38 (at the time of posting this). But my chart is still telling me I’m down 1.16%. Can someone explain this to me please?
Cheers.
Click Return, check FX Impact.
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I’m sorry, I don’t understand. Could you please explain further what you mean? BTW, I’m not using the app. I am on the website on a MacBook.
Always fx impact … wait the gbp usd hits 1.4, dollar is weakening rather than currencies strengthening.
You brought a position denominated in dollars, therefore as the dollar weakens and your national currency appreciates you take the hit.
For example gbp usd was 1.14 when I purchased some stock it’s now 1.33 so I have taken 17% hit on those parts of my portfolio. Therefore the stock needs to gain 17% for me to break even if nothing else is in my portfolio.
OR
I have purchased a hedge on my dollar exposure to limit my losses, the effect on my portfolio is the interest cost of hedging every pound on my dollar be denominated positions. Therefore only exposing me to an annual cost of c.3%.
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When you buy stock denominated in a currency different from your account currency, your return will be affected by the change in exchange rate between the two currencies.
The USD has been going down for some time against almost all other major currencies, so your stocks value decrease when converting back to your base currency.
Hope this helps.
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also when the dollar is strong you will carry that gain also on US stocks
@ABtrade, how did you hedge?
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I use a CFD on gbp/usd. I open a position for every stock I trade. It means I have to track the cfd as fluctuations need to be matched by margin to ensure a margin call isn’t made. This means I need capital in my CFD account with healthy free funds to prevent a margin call and my positions being shut.
You need to be conscious that if the currency doesn’t appreciate then you will have a loss on your CFD position. You will need to fund this loss and the interest and the margin to ensure the position stays open until you close your trade.
You need to also be conscious of interest as you are giving up 3% of gains a year. The S&P on average makes 8% per year. Therefore on average you will only be making 5% provided your stock tracks the S&P.
This isn’t advice or a proposal that you should hedge your position. You really do need to be considerate that cfd’s are dangerous leveraged items that carry a high risk of loss.
I really need to reiterate that CFD part, from looking at the margin thread many people are using CFDs but don’t seem to understand how they work or the risks associated. If you are going to hedge do your research and make sure you understand what a CFD is and how it works.
Thanks for the reply. I don’t use CFDs. I thought there’s another way. 