leverage / margin rates

[PHm4gor]

Hi guys,

I am new here and also new on forex trading, actualy i am more programmer than a trader so this is going to be a little bit noobish question but i would like to know why there are so many people concerned by various fees but almost noone cares about margin rates.

As i can understand it, if i buy for example 1 lot for 1k$ on leverage 1:100 there is going to be 100k lended by the broker to my account. This sum is going to be charged by the margin rate (like 7-8 perc). Lets say its going to be 7,3 perc which is making it approx. 1,25$ per hour. I have like 80 000$. So i suppose that i could trade 2-3 money pairs with something like 20 lots active on average. So i would pay something like 25$ per hour to the broker. I suppose its more than i would spent on fees (5$-7$ per trade).

Do i miss some basics? To me it seems that combo of execution fee+spread+margin rate is quite hard to be beaten. And that margin rate is the most significant part of brokers income for leveraged accounts.

 

[Rhody Trader]

In retail forex you don't actually borrow any money. It's like the futures market. The margin you put up is a surety against loss. You're not actually taking a loan for the difference because you're not actually buying or selling anything. As a result, there's no margin interest. There is, of course, carry interest, but that could go either for or against you.

 

[brettus]

Hi guys,

I am new here and also new on forex trading, actualy i am more programmer than a trader so this is going to be a little bit noobish question but i would like to know why there are so many people concerned by various fees but almost noone cares about margin rates.

As i can understand it, if i buy for example 1 lot for 1k$ on leverage 1:100 there is going to be 100k lended by the broker to my account. This sum is going to be charged by the margin rate (like 7-8 perc). Lets say its going to be 7,3 perc which is making it approx. 1,25$ per hour. I have like 80 000$. So i suppose that i could trade 2-3 money pairs with something like 20 lots active on average. So i would pay something like 25$ per hour to the broker. I suppose its more than i would spent on fees (5$-7$ per trade).

Do i miss some basics? To me it seems that combo of execution fee+spread+margin rate is quite hard to be beaten. And that margin rate is the most significant part of brokers income for leveraged accounts.

You pay interest when you hold the trade overnight usually. There are some brokers that charge you for any length of time you hold it. It's usually libor +2.5%. It something you want to look into before you open an account , but most guys are forex gamblers trading intra day, so never hold a position overnight. In short you have a valid point.

 

[Rhody Trader]

You pay interest when you hold the trade overnight usually.

You may receive interest when holding overnight positions. It depends on the pair. For example, AUD/JPY has a significant positive carry, meaning if you are long overnight you earn the spread. If you were short, you'd pay the spread.

 

[brettus]

You may receive interest when holding overnight positions. It depends on the pair. For example, AUD/JPY has a significant positive carry, meaning if you are long overnight you earn the spread. If you were short, you'd pay the spread.

Yeah you're right. If you're long you don't receive as much as you pay when you're short.

 

[marbig]

Yeah you're right. If you're long you don't receive as much as you pay when you're short.

Funny how that is the case. And I thought all the brokers were generous characters

 

[Rhody Trader]

There are spreads on interest rates as well as exchange rates, and they naturally work against you as well.