Hedging against base currency fluctuations

December 4th, 2012, 04:14 AM

I live in Sweden and can´t use the krona for my base currency at most of the brokers out there. If I use USD as base and the krona strenghten during the time I trade I have a problem when it comes to a longer timescale. I am thinking that a hedge is the best way to avoid loses in in fluctuations between my base currency and broker account currency. For example. If I use USD as base I am long USD as long I have the account. Should I then short the USD against the krona for the same amount that is in my acount to avoid getting trapped if the krona strenghtens? Or am I thinking the wrong way about this?

December 17th, 2012, 07:05 PM

The easy way to understand that is to take a piece of paper and a pencil and do the math yourself:
- on day 1
-> stock A value: $100
-> USD/Krone : $2 for 1 Krone (not idea of symbol/value)
- on day 10:
-> stock A: $110
-> USD/Krone: $1.5 for 1 Krone

I let you think about what you should have done to make a 10% profit in Krone

.

Hedging against base currency fluctuations

Discussion in Currencies

Hedging against base currency fluctuations