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Earning or Paying Interest

0 6

Earning or Paying Interest

Basic Understanding is that we have a cost or credit in carrying either higher yielding or lower yielding currency.

If we short AUDUSD, we would pay interest because the AUD has a higher interest rate then USD, if we went long, we would receive interest because we own the higher yielding currency.

1- Interest concerns apply to forex trading accounts:

  • Dealers use words like “interest,” “roll-over,” “tomorrow-next,” and “cost of carry” to refer to the premium that is paid or charged on each FX pair. Every forex pair carries an interest payment and charge related to having a long or short position.

  •  You will either pay or receive interest based on the pair you trade and the direction of your trade. You might need to check the IG website for additional details.

  • Daily changes to the premium are possible, but they usually don’t occur very often.

  •  The differential in short-term interest rates between the two economies represented by the currencies in the trading pair is the source of this interest premium. The interest rate used for short-term loans.

2- Depending on the dealer, are used to pay interest premiums:

  • The most typical method of paying or charging you for this interest is by making a physical payment; the money will be added to or taken out of your account at the end of each day, OR The broker has the option to reset your position at a little better price.

  • Your entrance price is reset to be less than when you initially entered if you were long and are owed a premium because of this position reset procedure. Similarly, your entry price will be reset to be somewhat higher than it was initially if you are short and owing a premium.

You can now benefit from LDN company’s services through the LDN Global Markets trading platform.

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