Rollover

I would like to know if it is common policy for brokers to have tiered interest rates on currencies by how much leverage you are using? As an example, I was demoing a carry trade strategy. I was long AUD which I see is at 6.75%and short the USD at 4.25%. It would be my guess I should be earning interest right? Well I get home and I have actually paid them a premium fee. I called to find out how this is possible and was given a 100 words in 10 seconds explanation with all kinds of calculations thrown in WTF? The funny thing is, while the interest rate changes with the leverage it never did pay the long position? It was always in their favor. I am confused.

I would like to know if it is common policy for brokers to have tiered interest rates on currencies by how much leverage you are using?

As usual different brokers have different rules for all sorts
of services, plus different charges etc.

Before starting this system you should in fact read your
brokers rules & regulations.

I was long AUD which I see is at 6.75%and short the USD at 4.25%. It would be my guess I should be earning interest right?

This is correct but see above.

Which broker are we talking about?

Took this from fxsol’s site

Q: Why must I pay interest and/or when do I get interest and who determines the amount of the interest?

A: In the spot Forex market trades settle in two business days. If a trader sells 10,000 euros on Tuesday, the trader must deliver 10,000 euros on Thursday unless the position is held open and rolled over to the next value date. As a service to our traders, FX Solutions automatically rolls over all open positions to the next settlement date at 5:00 PM Eastern Standard Time. Roll over involves exchanging the expiring position for a position expiring the following settlement date. The positions being exchanged are not valued at the same price. If a trader is long the currency bearing the higher interest rate, the position “being sold” is worth more than the position being acquired. The reverse is also true; if a trader is short the currency bearing the higher interest rate, the trader is acquiring a position worth more than the one “being sold”. The amount of the difference varies based on the currency pair, the interest rate differential between the two currencies, and fluctuates day to day.

At 5:00 PM each day, funds are subtracted from or added to accounts with open positions because of this automatic roll over. On Wednesdays, the amount added or subtracted to an account as a result of rolling over a position is three times the usual amount. This “3-Day” rollover accounts for settlement of trades through the weekend period. [u]When there are bank holidays in either settlement country the normal roll schedule does not apply.[/u]

The part I have highlighted made me laugh the most.

Total & utter gobblydygook.

it boils down to the fact I dont understand how I can be long the higher interest rate and have to pay interest instead of recieving it.

it boils down to the fact I dont understand how I can be long the higher interest rate and have to pay interest instead of recieving it.

As usual different brokers have different rules for all sorts
of services, plus different charges etc.

Before starting this system you should in fact read your
brokers rules & regulations.

If you took that trade at my broker you would have +ve interest
but…

Read your brokers rules & regulations, they can do what they like
it is their brokerage.