Hi there gxxr1130
I have been trading with them Live for about 3 and a half year now and can confirm that it works as follows:
First off, they will pay you interest on any CASH amounts you have available in you account, i.e. money that is not used as margin, just free money not being used. Just like bank would pay you a small interest on a deposit. So if you have no trades open, at least you get a little bit every day for whatever cash you have. It is not a lot hence why it is no good thinking you could make a living off of it unless you have millions in that event you might as well go put it in a regular savings account, I think the payment there would be better.
The second interest they have is the SWAP RATE which they pay/deduct on your open trades. I have already uploaded a interest table for the different currencies for all to see. Instead of paying rollover interest at 5pm like all other brokers do, Oanda actually calculates how much interest you would be getting each SECOND you have the trade open, so if you are long GBPJPY for one hour, when you close the trade, they will pay you immediately the interest for that one hour and so on…
Their max leverage is 1:50 as far as I know, hence why their interest payments are higher. The more leverage one uses the less the interest you get, hence why NF on a 1:100 or 1:400 pays less and less and less, same story with FXSol etc…
I learned of a broker on Friday that has ZERO spread, yep ZERO spread, a small commission though, but negligible. They pay/charge swap at 5pm. So imagine this, on Wednesday (3x swap day) you open a long position on Oanda, and with this zero spread guys, you keep the trade open just till before 5pm, and close it all. You get all the interest from Oanda because they pay per second, and you pay no rollover interest with the zero rate spread guy because you closed the trade before 5pm.
Once more, having two correlated pairs is not all that is necessary. We also need the pairs to be correlated on a volatility base. Of course the high spread pairs run much harder each day, if they didn’t the spreads would be low. Spreads are risk and volatility based. The first tell-tale. The volatility differential can be balanced to a certain extent via adjusted trade sizes. In the event of EURUSD and USDDKK one can go short less DKK then USD thus increasing the EURUSD short and still end with a nice interest payment each day. This of course is assuming the volatility ratio between the two pairs remain correlated.
There are many ways to pick the trade ratios. You can take USDDKK and divide EURUSD into it and you will see if you do that for many days you can get an average of 4.669…example (USDDKK / EURUSD) = 4.669 on average, it fluctuates between about 5.2 and 3.9 it seems… I can not get to much historic data on USDDKK in MT4 to reliably state this…
Another method is to simply look at the a ATR(14) of both pairs and divide it into each other, example: ATR(14) of USDDKK / ATR(14) of EURUSD This would give you a rough volatility ration…and so on and so forth.
Of course this is just usable if we can safely assume that the volatility correlation will hold as well and not just the directional correlation.
gxxr1130, it would be interesting to see how you run your math’s. These brokers can not really go mess with the interest rates to much, in fact it is not really in their power to make major adjustments accept for the miniscule one’s we see when we compare tables. The major differences are simply because of margin, you can not compare interest tables based on 1:50 with interest tables based on 1:400. Why not, simply because on a 1:400 you are lending more money on the short currency and you deposit less on the long currency.
Apart from that, if they do however decide to go all postal on their lending rates, let’em. In such an event they will cause a MAJOR arbitrage opportunity between the spot forex price they quote including their daily interest charge and the most current futures contract on that currency pair which already includes the official country interest rate in it’s price. Over time any futures contract’s price converges with the underlying cash price, due to the interest component that is running out. If these brokers think they are so smarty pants and go mess with their interest spreads, you just point me to them and I will peel them like an orange !!!
So in essence then, revealing any math’s will should not have any effect, and if it does, well, as I have just explained, it will only be to our benefit.
Best wishes,
MECER
I have been trading with them Live for about 3 and a half year now and can confirm that it works as follows:
First off, they will pay you interest on any CASH amounts you have available in you account, i.e. money that is not used as margin, just free money not being used. Just like bank would pay you a small interest on a deposit. So if you have no trades open, at least you get a little bit every day for whatever cash you have. It is not a lot hence why it is no good thinking you could make a living off of it unless you have millions in that event you might as well go put it in a regular savings account, I think the payment there would be better.
The second interest they have is the SWAP RATE which they pay/deduct on your open trades. I have already uploaded a interest table for the different currencies for all to see. Instead of paying rollover interest at 5pm like all other brokers do, Oanda actually calculates how much interest you would be getting each SECOND you have the trade open, so if you are long GBPJPY for one hour, when you close the trade, they will pay you immediately the interest for that one hour and so on…
Their max leverage is 1:50 as far as I know, hence why their interest payments are higher. The more leverage one uses the less the interest you get, hence why NF on a 1:100 or 1:400 pays less and less and less, same story with FXSol etc…
I learned of a broker on Friday that has ZERO spread, yep ZERO spread, a small commission though, but negligible. They pay/charge swap at 5pm. So imagine this, on Wednesday (3x swap day) you open a long position on Oanda, and with this zero spread guys, you keep the trade open just till before 5pm, and close it all. You get all the interest from Oanda because they pay per second, and you pay no rollover interest with the zero rate spread guy because you closed the trade before 5pm.
Once more, having two correlated pairs is not all that is necessary. We also need the pairs to be correlated on a volatility base. Of course the high spread pairs run much harder each day, if they didn’t the spreads would be low. Spreads are risk and volatility based. The first tell-tale. The volatility differential can be balanced to a certain extent via adjusted trade sizes. In the event of EURUSD and USDDKK one can go short less DKK then USD thus increasing the EURUSD short and still end with a nice interest payment each day. This of course is assuming the volatility ratio between the two pairs remain correlated.
There are many ways to pick the trade ratios. You can take USDDKK and divide EURUSD into it and you will see if you do that for many days you can get an average of 4.669…example (USDDKK / EURUSD) = 4.669 on average, it fluctuates between about 5.2 and 3.9 it seems… I can not get to much historic data on USDDKK in MT4 to reliably state this…
Another method is to simply look at the a ATR(14) of both pairs and divide it into each other, example: ATR(14) of USDDKK / ATR(14) of EURUSD This would give you a rough volatility ration…and so on and so forth.
Of course this is just usable if we can safely assume that the volatility correlation will hold as well and not just the directional correlation.
gxxr1130, it would be interesting to see how you run your math’s. These brokers can not really go mess with the interest rates to much, in fact it is not really in their power to make major adjustments accept for the miniscule one’s we see when we compare tables. The major differences are simply because of margin, you can not compare interest tables based on 1:50 with interest tables based on 1:400. Why not, simply because on a 1:400 you are lending more money on the short currency and you deposit less on the long currency.
Apart from that, if they do however decide to go all postal on their lending rates, let’em. In such an event they will cause a MAJOR arbitrage opportunity between the spot forex price they quote including their daily interest charge and the most current futures contract on that currency pair which already includes the official country interest rate in it’s price. Over time any futures contract’s price converges with the underlying cash price, due to the interest component that is running out. If these brokers think they are so smarty pants and go mess with their interest spreads, you just point me to them and I will peel them like an orange !!!
So in essence then, revealing any math’s will should not have any effect, and if it does, well, as I have just explained, it will only be to our benefit.
Best wishes,
MECER