When, or on what basis, is the swap (or interest) calculated?

Beginner Questions
1

As the title says: when, or on what basis, is the swap (or interest) calculated?

Is it calculated based on whatever instruments you hold at a specific time OR is it calculated based on whatever instruments you hold at a specific time AND how long you have held them for?

The reason I ask is that I see a lot of these so called ‘hedge’ systems popping up all over the idea being that you buy two currency pairs that effectively cancel / move inversely / effectively ‘hedge’ each other BUT depending on the pairs and the difference between the interest percentage you CAN earn the difference in interest when the swap is done.

If the interest is calculated at a certain time (broker dependant) and it does NOT take into account how long you have held those positions BUT only that you have those positions open at the time of the swap then what is to stop you from buying vast amounts of the two pairs just before the swap is calculated and then, just after you have paid / been paid the interest - closing those positions and then doing the same thing the next night?

Regards,

Dale.

2

Brokers can vary on how they handle this, but as far as I’ve seen most only deal with carry/rollover on positions held at the close of the trading day with no consideration made as to length of holding period. Oanda is the only one that I’m aware of that calculates continuous interest.

3

Thank you John - that’s what I thought - so then there is really nothing wrong with my idea (although it was really more for interest sake than anything else).

If you don’t mind - I would like YOU to have a look at my thread about the DAX - I would appreciate some input from you.

Thanks,

Dale.

4

I don’t really follow the DAX except on the fringes of my daily U.S. stock market work. What’s the link?

5

Hi John,

Thanks for replying.

Here is the link:

http://forums.babypips.com/newbie-island/2958-dax-30-a.html

The information in this thread refers to last weeks events of course.

Regards,

Dale.