In the world of forex trading, many foreign terms are used. Among them are swaps, which are often also known as rollovers, or interest stays. To find out about swap, let's look at the following review.
Swap
is the difference in the benchmark interest rate that applies in each
country whose currency is traded on the forex market. Swap
is only accepted by traders from overnight positions past midnight
(broker server time) and will be determined based on whether the
position opened by the trader includes long positions (buy a pair) or
short positions (sell a pair). In any pair, the trader must pay interest on the currency sold, and at
the same time will receive interest from the currency purchased.
Still confused?
Here's the story. Each country has a different benchmark interest rate, and that interest rate will change over time. Therefore, there are high-interest currencies, and there are low-interest currencies. We can see the latest interest rates from each country in the Forex Around data on this link.
For example, currently Australia's interest rate is 2 percent, while the interest rate of the United States is 0.25 percent. Well, traders who trade AUD / USD pairs may have to pay, or even get a swap from the difference in interest rates between these two currencies.
If a trader does 'buy AUD / USD', then the trader buys the AUD and sells USD. If the trading position is left open until after midnight (broker server time), then the trader must pay interest based on the USD interest rate and will receive interest based on the AUD interest rate. That is, the swap to be obtained is 2 percent (AUD interest) minus 0.5 percent (USD), or in other words the trader will get a per-lot swap of +1.5 percent.
Conversely, if a trader sells AUD / USD, the trader actually sells the AUD and buys USD. If this trading position is left open until midnight (broker server time), the trader must pay AUD interest and will only receive USD interest. That is, swaps per lot that will be obtained are the opposite of the first example, which is -1.5 percent.
It's easy!?
Between Swap and No Swap
This swap is very important for traders. As can be seen in the first example, the trader can make a profit from the swap just by opening the AUD / USD position until after midnight. This trading practice is known as the carry trade term, which is to profit from the difference in interest rates.
On the other hand, there are traders who actually avoid swaps, because swaps are derived from the difference in interest rates which are considered usury and prohibited in Islam. Therefore, many brokers specifically provide No Swap accounts. This facility offer is often carried on a variety of labels, including sharia accounts, Islamic accounts, non-swap accounts, or swap-free accounts.
Still confused?
Here's the story. Each country has a different benchmark interest rate, and that interest rate will change over time. Therefore, there are high-interest currencies, and there are low-interest currencies. We can see the latest interest rates from each country in the Forex Around data on this link.
For example, currently Australia's interest rate is 2 percent, while the interest rate of the United States is 0.25 percent. Well, traders who trade AUD / USD pairs may have to pay, or even get a swap from the difference in interest rates between these two currencies.
If a trader does 'buy AUD / USD', then the trader buys the AUD and sells USD. If the trading position is left open until after midnight (broker server time), then the trader must pay interest based on the USD interest rate and will receive interest based on the AUD interest rate. That is, the swap to be obtained is 2 percent (AUD interest) minus 0.5 percent (USD), or in other words the trader will get a per-lot swap of +1.5 percent.
Conversely, if a trader sells AUD / USD, the trader actually sells the AUD and buys USD. If this trading position is left open until midnight (broker server time), the trader must pay AUD interest and will only receive USD interest. That is, swaps per lot that will be obtained are the opposite of the first example, which is -1.5 percent.
It's easy!?
Between Swap and No Swap
This swap is very important for traders. As can be seen in the first example, the trader can make a profit from the swap just by opening the AUD / USD position until after midnight. This trading practice is known as the carry trade term, which is to profit from the difference in interest rates.
On the other hand, there are traders who actually avoid swaps, because swaps are derived from the difference in interest rates which are considered usury and prohibited in Islam. Therefore, many brokers specifically provide No Swap accounts. This facility offer is often carried on a variety of labels, including sharia accounts, Islamic accounts, non-swap accounts, or swap-free accounts.
Well, do you want to trade in a swap account, or swap free account? What
you need to consider if we are going to trade forex in a swap account,
it is necessary to pay attention to the changes in swap rates that are
usually provided by the broker on the site. Brokers usually provide swap rate data in the form of dollars or pips per lot. Whereas
if you want to trade freely swap, then consider the broker's rules
because often brokers still charge a swap replacement fee. In addition to replacement costs, there are also swap-free policies in a limited period. So whether you choose account-swap or swap-free, monitor the rules of the legal broker are both mandatory.