I recently learned I need to pay interest on CFD margin. Do I need to pay interest on the 100:1 margin/leverage I use on Froex? One firm tells me they charge 1/1000 per day or 36.5% per year.
Dang. You either earn interest on the full amount traded even using margin (long GBP/JPY) or if you are short the higher interst pair then you pay it. But you don't pay just a random interest charge for them allowing margin trading. It's called Rollover/Swap/IRD in the FX market but it can grow your account if you are trading on the correct side.
That firm is out to rip you off royally. Given the nature of the trade, you should always be paying or receiving the interest rate differential (IRD), plus a 50-150 basis spread to your broker. Meaning if you went long USD (5.25%) and short JPY (0.25%) you should be earning 5% on the transaction, less the broker spread. If you're trading the major pairs, then you're better off with currency futures. Some related discussions on the matter: http://www.elitetrader.com/vb/showthread.php?s=&threadid=84667 http://www.elitetrader.com/vb/showthread.php?s=&threadid=66505
For Forex if you hold your position overnight you will either be charged interest or credited interest depending on your position (long or short) and the instrument. If your broker is charging you that much something else is going on.