First time trading forex: Question

Discussion in 'Forex' started by peilthetraveler, Sep 26, 2008.

  1. Does forex charge interest on the margin you borrow? Like say you have 10k and you buy 200k of something. Do you get charged interest on that 190k you are borrowing? Or is it all free margin?

    If you do get charged interest, how much is it?
  2. It depends on the interest rate differential between the 2 currencies. They will either charge you a debit or give you a credit. For example if you buy the Yen - "carry trade" - you will get paid interest.
  3. Usually the 'rollover' interest will be worked out at 5pm EST.

    Oanda calculates it on a constant basis rather than once a day - they have a calculator for working it out here:

    Just make sure you change the 'interest type' to 'trade'.

    With Interactive Brokers, it also a little different, as they only change interest on the actual borrowed amount, so it will depend on how much is in your account, and what the base currency your account is.
  4. snseeker


    Interest is based on the currancy being traded and your base currancy. For me it's the USD. If you have a big spread on your SL/TP it will not be to noticable, if you are scalping you will have to pay attention to the interest and the pip spead for your transaction.

    There is a very good calcalator for me EUR/GSP or EUD/AUD gives me better interest rates on shorts. But spend a few minutes and see what the charges are, for most of us it is to little to care about.
  5. Getting your Buys and Sells mixed up could be just a bit of a drawback trading forex :p

    What tradeable currency are you buying Yen against, last time I looked Japan had the lowest interest rate in the world (mind you the Fed is getting there!)

    You mean Sell Yen, right?
  6. It is only a drawback if your timing is off. Otherwise you are a genius...
  7. With forex, you do not need to borrow margin. Each transaction entails the simultaneous buying of one currency and selling the other (base / quote currency say EUR / USD).

    If the EUR/USD exchange rate is 1.50 and you buy 1 lot (100 000 units), you will own 100 k EUR and owe 150 k USD. You receive interest for what own and pay interest for what you owe. The difference is credited to or deducted from your account.

    For more information about the currency market: [see: Buying and Selling and Interest Rate Calculation].
  8. I think you'll be waiting a while for Yen to be yield positive.....other than that you're a genius too :D
  9. snseeker


    But I did short EUR/USD over weekend, nice return. I am going to take the next couple of days off and see what shakes out.