What Are Swap Rates?
Swaps are an overnight interest charge that traders must pay to hold a position open overnight. When a trader wants to keep a position open, they will pay interest on the currency sold, and receive interest on the currency bought. The swap rates are derived from the interest rates of the countries in the currency pair, whether the trader is going long or short and the current market conditions.
How Do Swap Rates Work?
The corresponding volumes of currencies in the trade are borrowed and lent from the interbank market, at the current credit interest and deposit rates. The gains from lending and the cost of borrowing are transferred to the trade by the broker. Either the position gets re-opened automatically, at a new value date, adjusted to swap rate and a new price, or the swap is credited to or debited from the traders account, while the position is left with the previous price.
- Swap rates are applied only when positions are kept open until the next trading day
- Some currency pairs may have negative swap rates on both sides, both Long and Short
- Swap rates are calculated in points and converted automatically into the base currency of your account
- Swap rates are applied at 00:00 platform time
- Each currency pair has its own swap rate and is measured on a standard size of 1 lot (100,000 base unit)
- Swap rates are applied each night onto your open positions are when the position is left open it is given a new ‘value date’. On Wednesday night, the new value date for a trade held open is charged to Monday. Due to this, swap rates are charged at triple the rate.
Swap Rates are Subject to Change
The most accurate information is available on the MetaTrader and cTrader platform.
MetaTrader
1. Select “View” from the menu bar
2. Right-Click on “Market Watch” and select “Symbols”
3. Right-Click on symbol you want to check and select “Properties” (MT5, select “Specification”)
cTrader
1. Go to the “Finder” tab
2. Type the symbol name in the search bar
3. Click the information icon next to the symbol to view its settings
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