Quote:
Originally Posted by KP FX Trader
Thanks so much John for clearing me up. Can you clarify what you mean by "If you expect 3.15% return, that would be on however much you invested."
I "invest" whatever my risk is. If I risk 500 pips on a 100k lot I risk (invest) $5,000. Are you saying I should be calculating on the 5k "risk"?? The carry is paid on the lot size correct? Is the carry interest differential an annual yield?
PS. (I was using an old Aussie rate posted on my wall, just fyi so no one is confused that might read this post)
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I was just referring to what leverage you are using. The 3.15% will be the return on the margin you put up to float the position. It seems you are calculating return on risk; but that isn't necessarily the risk through the notional and margined position you are dealing with.
The carry is paid depending on lot size, yes. The carry on a 10 lot position is 10 times greater than it would be on a one lot position.
The carry interest differential that you see in the FXCM platform is paid each day. When you are talking about the theoretical difference between benchmark lending rates (which we cannot deal at because we are not banks; rather we deal with money market rates), then you are talking about an annual return.
