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Thread: Noob question

  1. #1
    Join Date
    May 2018
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    Noob question

    Lets say that I have $10k CAD in my bank account and I want to convert it to USD for use in a trading platform like Ques trade or IB, what's the best way to do that?

    Should I first convert it at my bank, then transfer the USD funds to the broker? Or should I transfer CAD then let the broker handle the conversion to USD?

    I'm a bit confused because the banks seem to take a cut for themselves but it's not written as a traditional fee, it's buyer/seller rates and I'm just having a little trouble wrapping my head around it all. thanks

  2. #2
    Join Date
    May 2018
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    Re: Noob question

    You can transfer CAD and convert it in your brokerage via a technique called Norbert's gambit. I've never done it, but I heard that for large sums, it has the lowest overall expenditures.

  3. #3
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    Re: Noob question

    Oh damn, seems easy and efficient. Thanks for letting me know about this!

  4. #4
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    Re: Noob question

    If you're with Questrade here's a summary of the process

  5. #5
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    Re: Noob question

    Everyone takes a cut.


    Converting it at your bank would give you whatever bank rate is available to you, less conversion fee. Then getting it to your broker would likely also cost unless they're willing to accept some form of transfer (which you would also pay for). Unless you're a big customer of the bank you're going to get "going rate" not inter-bank rates.


    Cross border investment is tough. There are a ton of rules on both sides to make it more difficult than it used to be, and the US side won't even accept the funds if you can't provide a US tax number (social, EIN).


    There are a few options: Vanguard (which is hobbled in Canada), a few Canadian discount brokerage houses, TD (which has multiple options, and some iffy fees). Using a US brokerage will likely require an EIN and significant tax withholding.

  6. #6
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    May 2018
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    131

    Re: Noob question

    What do you mean by that? Currently I can convert CAD -> USD at my bank and trade US equities without any additional paperwork.

    Both platforms I'm looking at (Questrade/IB) work the same AFAIK.

  7. #7
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    May 2018
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    65

    Re: Noob question

    You're trading US equities in Canada. I thought part of your question was trading US equities in the US. If you're trading in Canada, why are you converting at all?

  8. #8
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    Re: Noob question

    I want to convert once beforehand because the stocks I want to trade are listed on US exchanges and I'd rather just deal with USD than constantly convert between CAD -> USD on every trade.
    I already have my long term investments, this is more for daily trades.

  9. #9
    Join Date
    May 2018
    Posts
    37

    Re: Noob question

    In IB, you can simply buy USD with CAD at whatever bid/ask it trades at. The spread is usually 1 cent, very tiny and super liquid. Of course you're then exposed to the normal fluctuations of the currency pair.This is how it's done in the IB platform: https://ibkr.info/node/2059I haven't used QT but I'm sure there's guides online how to do it in their platform.

  10. #10
    Join Date
    May 2018
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    131

    Re: Noob question

    This should be higher up. With this you're only paying transaction fees once. With Norbert's gambit twice. Also less chance to lose money to stupid tax laws (in my country you need to pay tax on a percentage of the total value of shares bought/sold in a transaction, I'm pretty sure this tax doesn't apply to forex trading.)

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