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Account currency and conversion costs, a small leak I hadn't noticed

I trade pairs that don't have my account currency in them, and every profit and loss is converted back at some rate. I hadn't thought about the cost of that until I looked closer.

For a pair like EURUSD in an account denominated in something else, the profit is calculated in the quote currency and then converted. Most brokers do this at their own rate, and that rate may include a margin. On small trades it's insignificant, but across many trades it adds up.

What I did was compare the conversion rates in my statement with the market rate at the same time. There was a small difference, as expected, and it was consistent. Nothing dramatic, but it's another cost for the list. When I factored it in, it changed the calculation for pairs where I was already working with a thin edge.

Some people choose an account currency to match the pairs they trade most. Others find it makes no difference. I'd say it's worth knowing and worth checking against your statement, rather than assuming it's zero.

This is one of those costs nobody mentions. I checked mine the same way and the conversion margin was small but consistent, so it adds up for anyone trading a lot. One option some brokers have is an account in the same currency as the quote currency of the pairs you trade most. If most of your trading is on dollar quoted pairs, a dollar account removes most of the conversion. Worth asking your broker what options exist before assuming you have to live with it.

Also worth knowing that the conversion affects how your risk is calculated. If the rate the broker uses moves during the day, the money value of a pip changes too, so the same lot size on the same stop can mean slightly different risk at different times. For most people that is tiny, but if you size very precisely, it is another reason to use a calculator that pulls the current rate rather than a fixed number in a spreadsheet.