Do you hate paying foreign exchange fees? So do we! Luckily, there’s a way for you to convert between US dollars and Canadian dollars, or vice-versa, without paying a foreign exchange fee.

This tried and tested currency conversion strategy is called Norbert’s Gambit.

What is Norbert’s Gambit? The basic idea is to find a security that is listed in both US dollars and Canadian dollars. You then buy the security in one currency, transfer it over to the same security that is priced in the other currency, and then sell it.

This transfer is free to do so if your bank/broker tries to charge you money, then it’s time to find another bank/broker.

The only fees you would pay are your normal trading fees, which usually range from $0 to $10 a trade. If you’re converting more than $1,000 then you will likely be saving money by using Norbert’s gambit.

One thing you need to watch out for is that you want to pick a security that doesn’t fluctuate too much in price. The last thing you want is for the price of the security to go down before you’ve had a chance to sell it in the currency you want.

Luckily we’ve done the research for you, and found the perfect security to implement Norbert’s gambit: The Horizon’s US Dollar Currency ETF (Symbol DLR).

Let’s use DLR as an example for executing Nobert’s gambit to convert $10,000 Canadian dollars into US dollars.

1. Get a quote for DLR and calculate how many shares you can buy for $10,000. Keep in mind you might not be able to buy fractional shares so you’ll have to round down.

2. Place a buy order on DLR for the number of shares you calculated. The trade will execute in Canadian dollars.

3. Transfer your DLR shares into DLR.U (this is the US dollar equivalent of DLR). The formal name for this process is called “journaling the shares from DLR to DLR.U” in case you need to talk to your brokerage. Many brokerages will also let you do this online. You now hold DLR.U shares which are priced in US dollars.

4. Place a sell order on all of your DLR.U shares. The trade will be executed in US dollars.

Voila! Your Canadian dollars have now been converted to US dollars.

The whole process can sometimes take up to five days so if you need the foreign currency immediately then this probably isn’t the right method for you to use. However, if you have time then this will save you some serious money if you’re converting large amounts.

We would recommend using Norbert’s Gambit if you’re converting at least $1,500. If it’s a smaller amount, then we don’t think the time it takes to execute Norbert’s Gambit is worth the savings.

If you’re looking to convert US dollars into Canadian dollars then you can just buy DLR.U and sell in DLR using the same steps above.

If you’re a TD Direct Investing customer, then check out our step-by-step guide for implementing Norbert’s Gambit on their platform:

Norbert's Gambit Infographic
Norbert’s Gambit Infographic