Comments on: The Cost of Forex Trading http://theessentialsoftrading.com/Blog/index.php/2010/01/25/the-cost-of-forex-trading/ Information and resources for those looking to learn about trading and the markets Sat, 04 Feb 2012 14:17:59 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Rudolf Boquiren http://theessentialsoftrading.com/Blog/index.php/2010/01/25/the-cost-of-forex-trading/#comment-16787 Rudolf Boquiren Sun, 22 Aug 2010 01:57:36 +0000 http://www.theessentialsoftrading.com/Blog/?p=1623#comment-16787 Interesting article! I'd like to add that the 2 major costs of forex trading, which are the spread and interest rate rollover, only matter based on your particular style of trading. If you're a short-term forex trader, such as a scalper, then you only really need to worry about the spread. Obviously, the smaller the spread, the better the chances for you to make a profit. On the other hand, if you're a long-term forex trader (i.e., position trader), then the interest rate rollover matters more (in the case where you're paying interest rather than earning it). Of course, the spread is still a factor to consider, but less so if you're looking for higher-pip profits, which is usually the case with long-term traders. Interesting article! I’d like to add that the 2 major costs of forex trading, which are the spread and interest rate rollover, only matter based on your particular style of trading.

If you’re a short-term forex trader, such as a scalper, then you only really need to worry about the spread. Obviously, the smaller the spread, the better the chances for you to make a profit.

On the other hand, if you’re a long-term forex trader (i.e., position trader), then the interest rate rollover matters more (in the case where you’re paying interest rather than earning it). Of course, the spread is still a factor to consider, but less so if you’re looking for higher-pip profits, which is usually the case with long-term traders.

]]> By: SYN http://theessentialsoftrading.com/Blog/index.php/2010/01/25/the-cost-of-forex-trading/#comment-16344 SYN Fri, 14 May 2010 00:01:49 +0000 http://www.theessentialsoftrading.com/Blog/?p=1623#comment-16344 If you consider stock investing on longer timescales, at least a few months, then dividends are effectively a carry. If you short a high dividend stock while going long in a low dividend stock the dividend payments can burn you just like going short EUR/USD. Also, if you accept that dividend payments create a sawtooth signal in stock prices (ramping up to dividend date then collapsing) then this is true even on short timescales. Of course, FOREX's 100:1 leverage gives differences as large as 440% annulized (AUD/JPY), while stock's 3:1 (for shorting) leverage with a 10% dividend difference gives at most 30%+2*margin interest rate. If you consider stock investing on longer timescales, at least a few months, then dividends are effectively a carry. If you short a high dividend stock while going long in a low dividend stock the dividend payments can burn you just like going short EUR/USD. Also, if you accept that dividend payments create a sawtooth signal in stock prices (ramping up to dividend date then collapsing) then this is true even on short timescales.

Of course, FOREX’s 100:1 leverage gives differences as large as 440% annulized (AUD/JPY), while stock’s 3:1 (for shorting) leverage with a 10% dividend difference gives at most 30%+2*margin interest rate.

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