فوركس ساتو

OVERNIGHT INTEREST
Forex Sailing

In my previous eBooks I typically omitted the topic of overnight interest
because most of the trades I taught you were “day trades” meaning that you
entered and exited the trade all in the same day. Because “Sailing” involves
trades that last for multiple days (hopefully weeks or even months) then you
should now be made aware of what overnight interest is and how it affects
you.
When you trade Forex what you are actually doing is you are entering into a
contract to exchange currency with someone else in the world. Essentially
you are agreeing to deliver (for each lot traded) $122,000 USD cash in
exchange for €100,000 EUR (assuming an exchange rate of 1.2200). The
reason why an armored truck doesn’t drive up to your door to deliver all this
money, and no one is mad at you for not having delivered them their money is
because your broker automatically “rolls over” your trade into the next day as
they assume that you don’t actually intend to deliver nor take delivery of
actual currency (if you really want to do this then contact your broker to not
automatically roll over, but I doubt that you’d want to do this).
Ok, so why do you have to pay “overnight interest”? It is because nobody
expects you to drop-ship the money today (you have two days to settle the
trade), thus while the money is still in your hands they’ll be charging you
interest for holding onto it, but you also get to charge them interest for holding
onto your money. If worldwide interest rates were all the same then we
wouldn’t need to worry about “overnight interest”, because what you would
owe them would be cancelled by what they owe you. In the real world,
however, there are different interest rates imposed by the various world
governments, and so what you have to observe is the net difference in interest.
Note that on Wednesday you get charged (or credited) three times the regular
overnight interest because the settlement period (if you were to actually
deliver the cash) would happen over the weekend, so you get a “3-day
rollover” from your broker, hence why the Wednesday overnight interest is
three times as large as normal.
So how do you calculate the interest? The formula is simple:
(1 day interbank deposit rate for the base currency)
minus
(1 day interbank deposit rate for the counter currency)
= equals
interest rate differential
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then divide the interest rate differential by 365 and that gives you the
daily differential
then multiply the daily differential by the total open position in
currency pair, then divide by 100
If I just lost you then don’t worry about this stuff, your broker will calculate
all this automatically for you anyhow.
Brokers usually post the interbank rates somewhere on their websites so you
can go to look it up if you want to. The reason why I’m not providing you
with the interest rates here is because they change from time to time.
Ok, say you’ve made a trade on EUR/USD. Today the interbank deposit
interest rate for EUR is 2.00% and USD is 3.50%. Let’s say you traded one
lot (100k) and were long EUR, short USD, then this is how it would look:
Long EUR (2.00) – Short USD (3.50) = -1.50
-1.50 / 365 = -0.004110
(-0.004110 x 100,000) / 100 = 4.11
Therefore 4.11 EUR would be debited from your account. If you were to
trade in the opposite direction then 4.11 EUR would be credited to your
account for the overnight interest. Assuming an exchange rate of 1.2200 then
4.11 EUR equals 5.01 USD.
If you are trading in a mini account, or with some brokers even a regular
account, then regardless of whether you should be receiving overnight interest
or be paying a small amount they will ignore what you should either receive
or pay out and simply charge you a flat 1 pip overnight interest. This is a ripoff!
Some brokers will charge/credit you appropriately, but some brokers will
nail you with the 1 pip charge regardless.
For the above reason you should carefully select the broker you’ll engage in
“Sailing” trades with (I later suggest a good broker for this). This can make a
huge difference for you! Let’s say that you entered into a trade on EUR/USD
that lasted 60 days (counting weekends). If your broker charges you 1 pip per
day then you’ll pay them $600 per lot traded! If you were long EUR/USD
with another broker then you would earn $300.60 in interest (meaning you
would do $900.60 better on that trade than with the other broker), or you
would only pay $300.60 interest if you traded in the opposite direction (saving
you $299.40, roughly half, from what that other broker would have
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charged). Either way it is far preferable to trade with a broker that charges
you overnight interest like this.