Norbert’s Gambit Explained: Save on Forex Fees

As you seek to enhance your trading strategies, you are likely to come across a technique known as Norbert’s Gambit. This strategy, developed in the late 90s by a savvy trader, has evolved from a loophole into a viable conversion strategy, helping traders save on Forex fees and more. Here’s how one trader’s unique approach to converting between CAD and USD has become a popular option used by thousands today.

What Does the Term “Norbert’s Gambit” Mean?

Norbert’s Gambit refers to a technique used by traders to reduce foreign exchange fees when converting their CAD and USD. It involves utilizing financial assets, such as exchange-traded funds (ETFs) and stocks, to make the conversion behind the scenes, rather than as a primary action.

The “Gambit” part of the name refers to the calculated risks one takes on when attempting this strategy. If done correctly, Norbert’s Gambit can save investors thousands in fees. However, if the maneuver doesn’t go as planned, it can result in you paying more than the current foreign exchange rate.

Who Created Norbert’s Gambit and Why is it Popular?

Norbert Schlenker, the inventor of this strategy, was always a gifted accountant. Impressively, he scored in the top 5 in Canada when he took his CFP licensing exam in 2003. He also founded Libra Investment Management in mid-2003, intending to help investors maximize their returns.

Norbert Schlenker: Source – Libra Investment

Norbert’s Gambit refers to a strategy he developed that utilizes dual-listed securities as a medium for currency conversions. This strategy eliminates the exorbitant exchange fees paid by investors when converting CAD and USD, resulting in substantial savings in certain scenarios.

What Problem Does Norbert’s Gambit Solve?

Norbert’s Gambit solves one key problem – the cost of converting funding toa nd from USD. Conversion costs can add up, with each conversion also including a fee added by the broker for the service. In many instances, this fee can range from 1.5% to 3%. While this may not be a lot of money when discussing smaller transactions, it can add up to thousands when discussing larger conversions.

Why Would an Investor Use Norbert’s Gambit?

There are several reasons why using Norbert’s Gambit makes sense for traders. For one, Canadian investors can secure substantial savings by avoiding the Forex fees. In some instances, conversion fees can hit 5% of the total. As such, a person would pay around $3-5k in Forex fees if they wanted to convert $100k from CAD to USD.

Norbert’s Gambit eliminates these fees, which makes it a smart maneuver for those who convert between USD and CAD often. It also makes sense for traders who want to convert large sums. Keenly, this strategy is best for conversions over $5k and up. Smaller conversions will not see the same level of saving, with many stating the amount equaled or even surpassed direct Forex options.

In What Situations is Norbert’s Gambit Ideal?

There are several scenarios where Norbert’s Gambit is the ideal option. For one, Canadian investors who seek to enter the US stock market will find that this approach is effective and can save them thousands in fees in the long run. Also, investors or businesses that must convert CAD to USD or vice versa often. This approach bypasses fees and enables traders to convert funds without having to take additional steps.

Another scenario in which a trader would utilize Norbert’s Gambit is when they want to transfer funds to their RRSPs (Registered Retirement Savings Plans) or TFSAs (Tax-Free Savings Accounts). Using this method provides the most cost-effective way to get funds converted and into their destination. As such, it has become a popular and recognized strategy for those planning retirement.

Who Uses Norbert’s Gambit?

Several types of investors would utilize Norbert’s Gambit. For one, Canadian investors are the primary traders who use this method, as they are the ones who need to convert funding to USD most frequently.

In terms of their strategy, both long-term and retail traders leverage this approach, but in different ways. Long-term investors use the strategy to save on their Forex fees over time and to make trades into promising US stocks directly from CAD holdings.

Retail traders are likely to utilize this strategy when investing in US stocks and ETFs. These traders often utilize online brokers, which enable them to register their accounts and request journaling directly from their trading app. Notably, this strategy works with non-registered or registered accounts, adding to its flexibility.

How Does Norbert’s Gambit Work?

Norbert’s Gambit is a straightforward process utilized by thousands of traders every day. It begins when you find a dual-listed stock. These stocks have listings on both the US and Canadian exchanges with identical pricing.

Once you purchase the stock using CAD, you then need to request that your fees be journaled into a USD version. This maneuver converts how the stock is sold. Now, sell the stock on the US exchange and collect the funding in USD. From there, withdraw the USD funds, and the process is complete.

Unlike using a Forex, there isn’t a bunch of extra paperwork or regulatory hurdles you need to overcome. This method is fast, efficient, and used daily by Canadian traders to save on fees. It can also be used by U.S.-based investors who need to convert their funding into CAD.
Swipe to scroll →

CAD→USD vs USD→CAD Differences

There isn’t much of a difference when you reverse the conversion. All of the same principles apply when converting USD to CAD. The main difference is that traders need to ensure that the stock they intend to sell for CAD has local liquidity. If not, the process could result in delays and even potential losses. Remember, regardless of the direction of your conversion, time is of the essence during Norbert’s Gambit.

Steps at Major Canadian Brokerages

When you break the process down to a brokerage level, you find that it’s nearly identical across the industry. Retail traders will want to request self-journaling for the asset after purchase. This is done via an online portal for all major brokers, including Questrade, TD, RBC, and others.

Notably, each broker will have its own fee structure. These fees aren’t set in stone and can change depending on market conditions or other factors. As such, you will want to stay up to date on these fees to ensure you maximize your savings. Most leading discount brokers charge a small trading commission (often ~$5–$10 per trade) and either no journaling fee or a modest fixed amount (e.g., Questrade lists $9.95 unless on a premium plan). The big savings come from avoiding the 1.5%–3% FX spread, not from any special brokerage fee. Additionally, there could be other costs or fees that your broker adds for their services. As such, be sure to ask for a complete listing to avoid wasting time or overpaying.

What Are the Costs and Risks?

There are several costs and risks associated with Norbert’s Gambit. For one, you will need to pay a trading fee or commission on the trade. This fee can range, but usually sits around $10 for major brokers. There is also a journaling fee that must be paid to convert the asset between markets.

Depending on the broker, this fee can be a flat fee or a percentage of the transaction’s value. There are some brokers that offer deferred fees based on your account status, so be sure to ask if you qualify for any discounts. Also, delays can occur due to issues like a lack of liquidity.

Sadly, delays can lead to fluctuations in the stock or currency values. When this situation occurs, the Gambit part of the scenario begins. This risk could result in you losing funding during the conversion rather than saving. Consequently, you must complete Norbert’s Gambit as fast as possible.

What is the “Settlement Risk” During the Conversion?

Settlement risks present another challenge to the trader seeking to utilize Norbert’s Gambit. Settlement risks refer to a failure to deliver the asset after payment has been provided. When the other party defaults, it can lead to scenarios such as Herstatt risk, which has been a problem for the foreign exchange market in the past.

Herstatt Risk is a scenario in which one party sends funding for conversion, but the other party fails to send the converted funds back. This occurrence got its name after the Bankhaus Herstatt collapse of 1974. In this scenario, the bank accepted German marks for conversion but never delivered the USD, resulting in a global financial crisis.

There is never a risk-free way to conduct Norbert’s Gambit, or any currency conversion. There’s always a slight risk that one of the currencies will experience volatility during the process, resulting in additional losses. The best strategy is to avoid any time lag between the payment order and settlement whenever possible. However, this step could be more difficult than it seems, as the trader has no control over market fluctuations.

Tax Implications

One of the main reasons why traders continue to utilize Norbert’s Gambit is because of the tax implications. In registered accounts (RRSP/TFSA), there’s no tax on the conversion. In taxable accounts, buying and selling DLR/DLR.U (or any interlisted security) can create a capital gain or loss in CAD terms, which must be reported—even if small. The conversion itself isn’t taxed; the security trades can be.

Can Your Broker Refuse to Journal Shares?

Yes, your broker doesn’t have to fulfill your journaling request. This is rare, but it happens, especially when the stock you wish to journal isn’t offered by both exchanges directly. Every broker is unique, meaning it’s best to consult them directly to understand what their perspective is on journaling and when they deem it not doable.

In some instances, the reason why brokers don’t honor journaling requests isn’t due to policy, but rather technical restrictions. If the process is technically taxing or requires a lot of extra effort or manpower on their end, they may simply choose not to honor your request. Again, this is rare, but it does happen.

Which Stocks or ETFs Are Commonly Used?

The most common type of stock used to convert funding is DLR (CAD) and DLR.U (USD). These assets offer high availability and were built to service this request. As such, they have low conversion fees and provide a streamlined trader experience. These assets offer a direct link to USD exchange rates, making them a smart tool for traders to integrate into their conversion strategy.

Are There Liquidity or Spread Considerations?

Yes, traders executing Norbert’s Gambit will need to examine the liquidity and spread of the stock they select. Notably, a narrower spread is preferred, as this can symbolize liquidity in the market. Conversely, a tighter spread usually means that there is more volatility and less liquidity available. These concerns become more important as the value of the conversion increases.

How Long Does It Take to Complete Norbert’s Gambit?

On average, it will take two business days for a trader to complete Norbert’s Gambit. This process can be sped up or slowed, depending on your broker and other factors, with some traders completing the first part of the conversion in a day. Once you complete the trade, it will still be another few days before you can access the converted funds to make other trades. Consequently, expect a 3-5 day wait.

Can You Speed Up or Automate the Process?

At the moment, very few brokers offer a way to expedite the process. Many portions of the conversion are already at their limits in terms of speed. However, self-service journaling options like the one offered by Questrade have been shown to reduce the time by a day or more.

Automation options are also very limited at this time. In the future, as Artificial Intelligence improves and digital trading assistants become more capable, bots will likely become readily available to streamline this process. They could automate the buying, journaling, and sales processes, reducing the overall workload for future traders.

How Safe and Legal Is Norbert’s Gambit?

Norbert’s Gambit is legal and safe. This technique is used by thousands of traders daily and has been integrated into all major Canadian brokerages as of 2025. The sheer popularity of this strategy and its use by all major brokerages demonstrates that there is no risk of regulatory backlash.

However, Norbert’s Gambit should not be seen as 100% risk-free. Your timing, alongside the market’s volatility, remains a determining factor in the success of your conversion in terms of savings. Notably, there are also no reporting risks as the CRA approves the strategy for Forex purposes. Specifically, the CRA considers the transaction as a share trade, rather than a Forex transaction, meaning it can’t be confused with tax evasion.

When Not to Use Norbert’s Gambit?

Norbert’s Gambit is designed for certain scenarios in which the trader has a large amount of funds they wish to convert and reinvest. It’s not great for transactions under $5k. In these instances, the fees and delays can be the same as using a traditional Forex exchange. In some instances, they can even be more.

Better Alternatives

Swipe to scroll →

There are several better options for small conversions. Companies like Wise and KnightsBridge offer low-fee conversions and instant transfers. You could also use a bank or currency exchange kiosk. The latter is often found in airports, malls, attractions,  and other tourist-heavy areas.

Timing and Volatility are Crucial

Timing is one of the most important aspects of the Norbert Gambit, and why its name includes Gambit. The longer the process takes and the higher the risk that currency fluctuations can occur during the settlement period. These changes can sometimes eliminate any savings you may have gained using the strategy.

Worked Example: $10,000 CAD→USD

Let’s say you wanted to convert $10,000 CAD to USD, but first you needed to see exactly what the savings would be for each option. For this example, your broker has a 2.5% spread. This means that you would receive $9,750 after the conversion, resulting in $250 in losses. The conversion would be completed in 2-4 business days on average.

The same transaction completed using Norbert’s Gambit would include minor trading and journaling fees (~$12–$30). This would leave you with $9,970–$9,980 USD, representing ~$220–$240 in savings on this single transaction. However, there would be an extra few days in delays, with the average conversion completing in 3-5 days.

Final Takeaways

Norbert’s Gambit is a powerful strategy that can help Canadian investors get the most out of their transactions. The savings this strategy offers are hard to ignore, especially when dealing with frequent conversions or large sums. For those seeking to convert $5k and up, this method provides a low-cost, single transaction approach.

Best Practices to Maximize Savings (and Minimize Risk)

There are several practices you can integrate into your Norbert’s Gambit approach that will help to prevent risks. For one, always utilize highly liquid securities. This step will ensure that you’re not stuck in the asset for longer than expected.

Next, be sure to review your broker’s journaling process. Each broker has its unique details and fees. Don’t be caught off guard because you didn’t ask questions. Also, don’t forget to utilize limit orders to ensure that you complete your buy and sell actions effectively. Lastly, be sure to have funding for the journaling fees already set aside.

It’s recommended that you avoid Norbert’s Gambit process if the market is volatile. Volatility reduces the amount of time you can delay before making the strategy ineffective. As such, seek out stable markets to prevent unwanted losses and stress.

Is Norbert’s Gambit Only for Experts?

Norbert’s Gambit can be used by new and professional traders alike. The strategy remains the same for both parties. However, new traders should use smaller amounts of funding for their first attempt. This is the only time that it is recommended that a trader utilize this method when converting under $5k.

Norbert’s Gambit – Final Thoughts

Norbert’s Gambit is a prime example of how a loophole can become a common practice. This method of converting between CAD and USD has been in use for two decades and has now become popular and supported by the CRA and all Canadian brokers. As such, it’s a must-know for anyone seeking to reduce conversion fees.

Find other Finance Tips and News Here