Question about swaps

my question is about swaps. I guess i dont understand why a trading holding a pair has to pay swap, or what exactly is the swap? Is this a charge by the broker, or the bank itself?

Robbie…

Kinda like interest rates on a mortgage loan, one way or another your going to pay for use of the money, the spread is charged by the broker that is how they make money. Interest rate doesn’t make the Broker any money.

This is an article, I bookmarked this two sites, when I was trying to figure out swap. What is the forex margin trading? / Swap and Currency Swap definition off this page. Forex terminology

Beyond trying to understand what swap is, Babypips School shows a few examples of it with going long or short in the school also.

Hope that helps… ;o)

When you do a forex trade you are borrowing the currency you are shorting and depositing the currency you are long (after having converted it from the short currency, obviously). As a result, you must pay interest on your loan at that currency’s rate, while you get to receive interest on your deposit at that currency’s rate. The rates in question are the overnight interest rates.

Ty for ur help guys, clear now !

for the long do you still borrowing money, for example you use 1:100 leverage? you use 1000$ to control a lot of 100,000$ and you borrow 99,000$.

You are always long one currency and short the other when you take a position.

As for the example, your money is never actually used in the position. You borrow/deposit the full amount ($100k). The margin is just a surety against losses. It isn’t actually part of the transaction.

the margin is againt short as well, why charging interests on short and not on long?

You’re not following. Let’s use EUR/USD as an example.

[B]Long EUR/USD[/B]
(Long EUR, Short USD)
Borrow USD - convert to EUR - Deposit EUR
Pay interest on USD loan, Receive interest on EUR deposit

[B]Short EUR/USD[/B]
(Short EUR, Long USD)
Borrow EUR - convert to USD - Deposit USD
Pay interest on EUR load, Receive interest on USD deposit

You have to pay interest on the currency you are short (and by definition you are always short one of currencies in the pair your are trading) because you are borrowing it. But you receive interest on the long currency because you have it on deposit.