SWAP

Swap in Currency Market is interest rates for currencies pair that being trade. Interest rate also called daily swap procedure or roll over. Interest rate calculate daily and change on daily base. Interest rate is what make fluctuation in the Currency Market. Investor determine a currency is over price or under price by comparing what investor got in return. When investor hold a certain currency, they may earn the interest or they may pay the interest depend on what currency they hold.
When a country increase the interest rate, the price of the currency will go up, since investor will get more return. In vice versa when a country decrease the interest rate, the price of the currency will go down. In the long term interest rate will show ability and stability of the government to pay the interest.
Forex swap is set by the interest rate difference of two selected currencies (the currencies that still in open positions passed over night time). The interest rate which you can earn during the swap period is used by the broker to calculate the price of the swap. Generally, swap is based on the interest rates of the currency you are trading and the open position. For example AUDJPY; AUD interest rate is higher then JPY interest rate (Aug 2013). If you ‘Buy’ AUDJPY then chance is you are going to earn the swap. If you ‘Sell’ AUDJPY then chance is you are going to pay the swap. But every dealing desk / broker have their own calculation. Please contact your own dealing desk for detail.

 

About Vilas Kusumahardja

Originally from Indonesia, Vilas began trading ten years ago to support his love of travel. He figured that, as long as he could find an internet connection, he would be able to support himself. In 2008, he came to the United States and a year later, re-learned everything he thought he knew about forex. Now, he places trades using support and resistance, utilizing signals from EA's. Vilas helps at the Apiary Fund as a trader support representative managing the Apiary Fund blog and answering questions in the forum.

Like this Article?

Check out our newsletter for regular forex trading tips and advice!

Or you can visit our website to see what our unique business model is all about ...and how you can participate!

Comments are closed.