A Key to Correct Base Currency Conversion

The key lesson is to make sure that you follow the calculations all the way through yourself manually so that you understand what the conversion should be and make sure that your position size is appropriate relative to your base currency account. For example, you can get yourself into trouble. If my base currency was Australia and I have a system on the US. If I don’t set it up right, I might end up taking a 5% US dollar position, which ends up being more than 5% in Australia. Therefore, my risk is too high. Which is why you’ve got to make sure you just follow the calculation all the way through and then compare back to your base currency and make sure your risk is set at the right level. If you do the currency conversion the wrong way, then you can end up with too much risk, which some people have done in the past.