Home currency conversion: OANDA Australia

This topic is applicable only to v20 and v20 MT4 sub-accounts.

Trading products in a different currency from your account's home currency will incur a currency conversion charge.

OANDA charges a 0.5 % mark-up on the midpoint price at the time of conversion. This is the mark-up/mark-down portion applied to currency conversion rate.

Home currency conversion charges are applicable only when a trade/transaction is conducted in a different currency to the account’s home currency, and therefore needs to be converted to that home currency. It is applied to any realised profits and losses, adjustments, fees and charges that are denominated in a currency other than the account’s home currency and as such, needs to be converted to the account’s home currency.

Below is the methodology of how OANDA clients’ transactions are converted to the account’s home currency:

Formula: 

New bid = midpoint price x (1 - x%)
    
New ask = midpoint price x (1 + x%)
   
Where x% = mark-up (0.50%)
     
Midpoint price = (ask + bid)/2

Assumptions:

A client has an account denominated in GBP. They opened a long position on 1 unit of US Wall St 30 @ 29,000 and closed their trade at 29,100. They generated a profit of 100 USD.

The cost of converting the 100 USD profit back to their home currency (GBP) would be 0.39 GBP.

How is this calculated?

In order to convert 100 USD of profit to their account home currency (GBP), they would use the USD/GBP exchange rate plus the currency conversion fee.

Let’s assume the USD/GBP exchange rate is:

(BidClosedThe prevailing buy price.) (AskClosedThe prevailing sell price.)

0.77000

0.77005

In this case, the profit is a credit to the account, so the bid price is used (if it had been a debit as a result of a loss, the ask price would have been used): 

Profit converted to GBP without the mark-up = 0.7700 X 100 = 77.00 GBP

However, OANDA’s methodology is to charge a mark-up on the mid-price for the currency conversion to a client’s account’s home currency: 

Midpoint price = (0.77000 + 0.77005)/2 = 0.770025

Calculation: 

Fee adjusted exchange rate to convert USD to GBP = 0.770025 x (1 - 0.5%) = 0.766174875

The 100 USD profit on the trade will result in a credit to a client’s account when it is denominated in GBP of:

0.766174875 X 100 = 76.61 GBP

This is 0.39 GBP less than using the straight exchange rate and represents the cost of trading in USD when the account is denominated in GBP for this example.