Number Crunching -- How do you calculate daily interest?

I am working on an excel spreadsheet to help me with my trades. I am using a hedge strategy, so calculating daily interest is something I would like to know.

Also, I see GBP rate is 5.5% and USD is 5.25% … yet on my first day using this pair, my demo account said I lost money on my “buy” but how? I should be 0.25% in the black!!! Do brokers offer different rates?

If you goto your brokers web page they should provide this information to you if not then find a new one you dont want to deal with them. And yes different brokers do offer different rates, or you might say they figure them out differently. Some do not even pay or charge intrest. The best way to get your answer is to call them up and ask them. It is good to call them with a demo account because you can get a feel of how they will treat you when you go live.
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Correct me if I am wrong.

Interest is only applicable only after 2 business day.

I have heard of people holding their position and they simply earn on the interests. Please advice

It’s worth looking in to those rates more closely with your broker. I know with Oanda there is a bid and offer rate. It works just like price quotes. You pay the higher and receive the lower.

You are corrected. :slight_smile:

Brokers vary on their approach to this. The most common seems to be to apply carry interest on any positon held overnight. Oanda, as far as I know, is the only one to use continuous interest.

Hi, is rollover and interest the same here?

At FXCM Demo, I realised that there is a rollover cost when I hold my position more than a day. How different is it from the interest.

Please advice.

Technically, roll-over and interest are not the same.

Roll-over comes from the fact that in true spot forex trading there it is like trading a 2-day futures contract. You’re supposed to deliver the currency, which is what goes on in in the interbank market. Of course we don’t actually do that, so what your broker is going is effectively closing your position (thus avoiding the need for delivery) and opening a new one. In the process you lose the spread.

Carry interest comes from the fact that when doing a forex trade you are technically borrowing the short currency converting it to the long one and depositing those funds. Thus you pay interest on the borrowed funds and earn it on the deposited ones.

In practice I think you will find mostly that brokers either do roll-over or carry, but usually not both.

so how to calculate the daily interest?

also, why are my positions never open overnight? i didn’t put any stop either. i dont exactly know the details, i’ve never done carry trade before.

You need to know the overnight interest rates to be able to calculate the carry interest. If your broker does carry they should provide you with the interest rates.

As for no open overnight trades, you need to be more specific. Do you mean your trades are all exited at the end of the day and that’s it? You end up with no open positions?

yes. sometimes it will just exit even tho im not losing any money. weird. and i know i never put any limit/stops.

Who’s your broker?

Unless you’re over your margin limit I don’t really know what’s going on there. Something you might want to ask them about.