I trade both stocks and forex. Currently, I have 2 separate trading accounts with different brokers. I use MFGlobal for stocks and CityIndex for forex. Both are Contract for Difference (CFD) brokers.
It has come to a point to decide whether I should merge the accounts into one and fully utilise the capital. There are advantage and disadvantage with 2 separate trading accounts.
Advantage: Simple Accounting
Having separate accounts will aid accounting of profits and losses for stocks and forex. This includes the leverage, financing charges, data charges, commission charges etc. The more important advantage is that I will be very clear how much capital I have to make my trades, and not oversize my positions. Having a common account means I have to closely track my positions and make more calculations to determine the capital available for use.
All the resources you'll ever need as an investor
We've gone ahead and done the work. Compiled here are all the resources you'll need as an investor.
Disadvantage: Capital not fully utilised
The stock trading system that I am using generates about 3-4 opportunities in a year, during which the market trends strongly over weeks. During other time, the stock market is just moving sideways. This would mean that my capital is stuck in my stock trading account. Unlike stocks, forex presents more opportunities as a relatively dynamic marketplace. Having an account for both asset classes, I would be able to utilise the capital for stocks or forex depending on the best opportunity. The ability to swing the capital to the highest yielding asset swiftly is an advantage that trading offers, as opppose to a longer term investment approach, and this advantage should be capitalised to maximise profits for the trader.
The disadvantage has a stronger argument than the advantage. The disadvantage involves incurring opportunity costs which may greatly influence the overall profits that I can earn, while the advantage is just a matter of inconvenience which can be overcome. Hence, I am considering to merge my capital into one account.
For the 2 brokers that I have, only MFGlobal offers a common account for both stocks and forex. CityIndex separates the stock from the forex account. The other brokers that I know offer a common account are CMC markets and IG Markets.
Hence, the most obvious choice is to shift the capital from CityIndex to MFGlobal. But I am still considering this option and will evaluate the platform for forex trading on MFGlobal. I would need to find out the typical spread, platform interface and type of orders available. Another concern that I have is that the minimum forex contract size for MFGlobal is 1 standard while the CityIndex is 1 mini, and I may not be ready to trade a standard contract at this point in time.
If you were me, what would you do?