Swap Rates and brokers

Hello,

I have an account with a broker that is actually an IB of ODL securities, and they couldn't explain to me much about how swap is being calculated.

I have searched different threads on the forum and I found 2 of them discussing the brokers that pay the largest swap. There were quotes of something like $20+ per 1 standard lot per day in GBP/JPY.. from the discussion that I had with the customer representative it turned out that if I buy 1 lot (100 000 units) I will get 5 JPY, which is less than $0,6..

If anyone could shed some light here, it would be much appreciated. Here is the contract information from their MT4 platform:

http://screencast.com/t/YmFmYjc0YWMt


Thanks so much!

all brokers are different.. generally you take

the amount * barrowing currency interest rate%*time in the market(this will depend how they pay in cycles) * the conversion between two currencies

then you calculate the same for the lending interest rate
then subtract the lending interest from barrowed interest.

thats what it will be if the broker doesnt charge u a barrowing rate.. for example usd rate may be .25% but the broker may charge .10% to make the trade so ur paying .35% instead of .25%.. because the broker added onto the rate. this is the main cause in differences in swap rates..

 

1. Borrowed Interest = units * ({BASE} Interest Rate %) * (Time in years) * ({BASE}/Primary Currency)
2. Lent Interest = (converted units) * ({QUOTE} Interest Rate %) * (Time in years) * ({QUOTE}/Primary Currency)
3. Total Interest = Borrowed Interest - Lent Interest

if your searching to make profit based on interest rate youll need to understand that its that rate through the course of an entire year.. so lets say aud/jpy is 4%/.1% ur effective rate is 3.9% so if you "invest" 100% of ur account into a aud/jpy trade at no leverage and no broker costs on swap.. ull net 3.9% yearly much like a dividend on a stock.. with use of leverage u can maximize carry interest rate but will increase risk due to price shocks... your annual return at 2:1 leverage would be 3.9%*2 = 7.8% yearly without including gains due to appreciation.. youll need to maximize time in the market to recieve the 7.8% any time u are not in the market that year u will lose part of that 7.8% but will most likely retain most of the risk.

good luck hope that helps..

Great! Thank you for your help!

Can someone give me an example with the broker he trades with. It would be really helpful if you let me know how much your broker will charge you to roll over 1 lot in GBP/JPY,

Thanks!

long or short?

Long for example

k in this example holding a gbp/jpy trade long for 1 day to gain rollover using a account funded in united states dollars would in effect subtract a negative interest payment of $-1.06 per 100k block you hold.

the opposite would be more.. $-3.00

the reason you are netting a negative interest payment is because of the charge by the broker and the fact the currency is funded in USD using oanda