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What is a swap in forex trading?

If you ask experienced traders which term was trickiest to understand at the start of their trading journey, we’ll bet our bottom dollar that they’ll say the same thing: swaps.

 

If you’re also feeling stumped by swaps, don’t worry. We’ve got you and you’ve got this. Here is everything you need to know about swaps, starting from the basics.

 

In a nutshell, swaps are the interest that you earn or the interest that you pay for holding onto a trade overnight.

 

Whenever you open a position, you’re basically making two trades: you’re buying one currency pair and selling the other. To sell, you’re effectively borrowing that amount to sell, which means you’ll need to pay interest on the amount you’ve borrowed. However, you’ll also earn interest on the currency you’re buying (yay!).

 

Still with us? Good.

 

Swap values can be negative or positive. When trading on margin, you’ll receive interest on your long positions, while paying interest on short positions. At the end of a trading day, swaps will either be paid or charged into your account accordingly.

 

The swap fee depends on the position, instrument (market) you trade, number of days the position is open, and the nominal value of the position and the broker.

 

For instance, forex swaps will not be the same amount for EURUSD as it will be for USDJPY. Also, the swap will not be the same for a position that’s open for three days as a position that’s open for a week.

Does Eurotrader offer a swap-free account?​

Yes! Eurotrader offers swap-free accounts with no swaps or interest charges at rollover times. If you want to opt out of paying or receiving swaps, perhaps for religious reasons, then choose swap-free.

 

However, if you’re a swap fan, then check out our other accounts and choose the one that’s right for you, your risk appetite and budget.

 

Please note that swap-free accounts are NOT applicable to any instruments in Forex Exotics groups (eg, USD/TRY or EUR/NOK). Swap-free accounts allow you to hold positions for seven days, after which commissions will be charged for holding position longer.