Last updated on January 2nd, 2023 at 12:18 pm
Which deposit currency should I choose?
When I first started Forex trading, I often chose USD or AUD as my account’s base currency although a broker might have SGD denominated accounts because I thought it was cool to earn money in another foreign currency that is bigger than SGD. It would give me the illusion that I am actually earning more because 1 USD is equal to 1.3 SGD, so for every 1 USD I’m earning, I’m actually earning 1.3 SGD. How naive I was…
I couldn’t have been further from the truth. The truth is every time you convert your deposits to a foreign currency, you actually pay ‘hidden bank charges’ in addition to the telegraphic transfer fee of $20. The hidden bank charges are in the form of the spread. Today, I’m going to show you exactly how much you are paying.
But first the most important rule…
Always let your forex trading account be denominated in your home currency (if there is such an option). For example, if you Singaporean, then you should always choose SGD as your account’s currency. If you are Australian, then you should always choose AUD as your account’s currency. This is to ensure you don’t pay currency conversion chargers in the form of the spread.
Now let’s calculate exactly how much are the conversion charges
Let’s say we want to convert SGD 10,000 to USD. Let’s do 2 conversions. One with the conversion charges (spread) and one without, using the spot rate.
1. Calculation with conversion charges (spread)
We take SGD 10,000/1.3449 = USD 7435
The rate 1.3449 is taken from DBS Bank Singapore’s real time forex rates at 2.32pm SG time 21 Jan 2015.
2. Calculation without conversion charges (using spot rate)
We take SGD 10,000/1.3351 = USD 7490
The spot rate is taken from yahoo finance at 3.04pm, 21 Jan 2015
So effectively, you pay USD 55 in spread charges in addition to telegraphic transfer fees.
What currency do I choose if my broker doesn’t offer my home currency?
Choose USD. It is has the lowest spread conversion charges (i.e. the spread is the lowest). If you choose another currency, some banks even convert your deposit to USD first, then convert it to your chosen currency, and that means you pay the spread twice!
Let’s do a comparison to see the spread charges of converting SGD to USD vs SGD to EUR
1. 10,000 SGD to EUR with conversion charges (spread)
10,000 SGD / 1.5647 = EUR 6391
The rate 1.5647 is taken from DBS Bank Singapore’s real time forex rates at 2.32pm SG time 21 Jan 2015.
2. SGD 10,000 to EUR conversion without spread (using spot rate)
SGD 10,000 / 1.5451 = EUR 6472
Spot rate is taken from yahoo finance
Currency conversion charges for SGD to EUR is 81 EUR (93.75 USD) while SGD to USD is 55 USD. In conclusion, it is much cheaper to convert to USD than to convert to any other currency.
Brokers that offer SGD deposits (Deposits in your HOME currency)
One of the brokers that offers SGD (Singapore dollar) deposits is IC Markets. I have been trading with IC Markets for more than 5 years (at point of writing) and I find them to be a solid no nonsense broker than is here for the long term. IC Markets is ASIC regulated (Australian Securities & Investments Commission) (equivalent to Singapore’s Monetary Authority of Singapore).
They have been around since 2007, and all client funds are held in segregated trust accounts with Australian Banks in accordance with Strict Australian Client Money Handling Rules.
For friends from Hong Kong, Europe, Great Britain. IC Markets also offers deposit currencies in HKD, EUR and GBP.
Other deposit currencies that IC Markets accepts are CAD, AUD, USD, JPY, CHF, NZD
If you’re interested in a broker that allows you to deposit in your HOME currency and not incur hefty conversion fees on, IC Markets is a good choice. You can open an IC Markets account HERE.
To sweeten the deal, we’ve also arranged a 22% commission discount (for life) for all those who open through our website, through our link above! Click on the link above to gain access!
What to expect: Once you click the link above, it will send you to IC market’s webpage. Go ahead and open your account there. Fill out your personal details. Input our Partner ID 1441 to gain access to the 22% discount in the field ‘were you referred by an introducing broker’? Then submit your proof of identity (scanned passport page) and proof of address (scanned utility bill) and wait 12-48 hours for your account to be opened. Once your account is opened, the 22% lifetime commission discount is automatically applied to your account.
If you’re not ready for a live account, but you really like the idea of depositing in your home currency, why not try a demo account instead? You will get a chance to set your demo trading account’s currency to your home currency and get a feel for what it’s like to trade on home ground. Click on this ‘try a demo account‘ link above and select ‘Try a Demo‘ on IC Market’s site.
What to expect (when trying a demo): Once you click the link above, it will send you to IC market’s webpage. Go ahead and click ‘try a demo’. Fill out your name and email. Configure your trading account. Download the Metatrader 4 trading platform. Login and get ready to start trading!
Its been a joy writing this tutorial and I hope you have greatly benefited from my experiences!