What do we mean by Swap in FX trading?
It’s the interests you earned or paid for keeping a trade position open overnight.
Types of swaps:
1. Swap long-> for keeping long positions open overnight, traders are called “Position Traders”
2. Swap short-> for keeping short positions open overnight, traders are called “Swing Traders”
Purpose of a Swap:
Swaps are essentially interest rates for leveraged funds. Leverage is used by investors to increase the income from forex trading. A trader’s forex account is established to allow trading on margin or borrowed funds.
How to make money using Swaps?
By Carry Trade Method: buying a high-interest-rate currency with selling a low-interest-rate currency, the difference is your earnings.
Is there an opening period, or a certain time opening and closing for forex positions?
No, you’re not bounded by a specific time; you can keep it open as long as you like.
Can I do forex trading without Swaps?
YES! You can. By Intraday Trading, if your positions are closed before the end of the trading day (rollover point) you’re not going to pay nor earn any swap charge.
What determines the interest rate behind a forex Swap?
The individual currencies’ interest rates decisions are taken by their central banks, therefore the amount earned or paid rely on:
1. The difference between the interest rates of currencies
2. The forex broker’s commission rates
3. The day when you open the position
4. Price movements of the currencies
What is a negative currency Swap?
By buying a low-interest-rate currency with selling a high-interest-rate currency
Why do forex Swap rates triple for positions held over a Wednesday?
Most of the financial translocations need 2 business days to complete and settle, so those placed on Wednesday will settle on Friday. The banks still charge interest on weekends, while the forex market is closed.
In the MetaTrader trading platform, you can see swap rates of forex currency pairs, and find the current swap rates. They’re updated constantly to reflect the prices you’d be charged that night.
To view swap rates in MetaTrader 4 and 5:
Click ‘View’ > ‘Market Watch’ > ‘Symbols’
Select the currency pair
Select ‘Properties’ on MT4, or ‘Specification’ on MT5