If you choose Interactive Brokers for your trading and investment purposes, then IDEALPRO and FXCONV are the two main ways to convert currencies. The former is not unlike stock trade. It’s the broker’s venue to carry out foreign exchange (FX) trades. The order book contains quotes from some of the biggest global forex banks as well as other market makers and clients of the broker. IB charges a commission fee of up to 0.2 trade value basis points. The minimum per trade is $2. However, the broker does not levy a markup on the quotes. The venue is available on the WebTrader interface. IB will create a virtual FX position for tracking.
The other venue for currency conversion is FXCONV. It’s a bit cheaper and the execution is faster. The TWS platform hosts FXCONV.
Both venues perform the same function in the way of currency exchange. The difference is that IDEALPRO creates a record of transactions and a virtual forex position to monitor profit and loss at a later time, making it more convenient than FXCONV.
Currency conversion step by step
You start by identifying your currency pair, ex. USD.CAD. Then, you must identify the type of transaction. There are two options: buy or sell. If you want to convert USD to CAD, you want to buy CAD and sell USD. On the exchange, you would buy the USD. CAD pair.
US dollars are usually the transaction currency used for quoting on most forex markets. In other words, quotes are expressed as a unit of $1 with respect to the other currency in the pair that’s quoted. Examples include USD.SGD, USD.CAD, USD.CHF, and USD.JPY.
The EUR, GBP, and AUD are three notable exceptions to this rule. These pairs are quoted as EUR.USD, GBP.USD, and AUD.USD respectively. You can’t submit these pairs in an inverted format like USD.AUD because the quoting conventions are industry standard. No broker would accept such orders, including IB.