In addition to system trading, I like to keep part of my capital in a “macro” trade. This is some perversity of having read too much economics at business school. Last summer, I went short U.S. bonds. This returned 5% over three months. I might have kept it on. TBT is up another 7% since.
If your base currency is not USD, then your macro trades are also currency bets. For example, I chose to short U.S. bonds by buying TBT instead of shorting TLT. This means that my long TBT position was offset by a USD denominated debt. I reasoned that if the Fed chose to buy down U.S. bond yields, they would cheapen the USD. So, my trade implicitly included a currency hedge.
If I had instead shorted TLT, then I would be sitting on a lot of USD. I would be betting on bonds to go down but not USD, an unlikely combination.
When you trade U.S. markets with a CAD account, IB automatically loans you USD. My CAD capital is basically collateral for a USD trading business. I withdraw profits in CAD, to pay the bills, and every so often (when USDCAD is rich) I explicitly convert the accrued USD balance.
This is not really for Canadians only. Wherever you are, your choice of base currency is arbitrary. What really matters is the currency in which your expenses (and taxes) are denominated. Still, you can’t go wrong with Swiss Francs.
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