Hey guys! I noticed that when I traded live I had a negative swap of 7.01. What exactly does swap mean as I did research but I’m still not quite getting it.
Swap is a kind of interest that is debited or credited depending on currencies involved in your position. Trading a currency pair you buy one currency and sell another and if interest rate (set by a Central Bank) on the currency you buy is sufficiently high than the currency you sell you earn positive swap and vice versa.
Brokers also add their mark up so profit opportunities around swaps come up not so often. I trade swap arbitrage on Tickmill and Hotforex thanks to their swap free accounts but still there are some risks to overcome.
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To put it very simply it is the difference in the two currencies interest rates that you will either receive or pay, calculated when you hold a position overnight…
It is probably explained better here… Swap Definition | Forexpedia by BabyPips.com
Interesting! I was always curious as to whether there was enough of an edge there for people to trade this profitably long term. Although I never really looked into it too far. Good to know!
From my understanding it’s the interest rate difference for currencies.