Swap is a special operation on Forex
Let's figure out what a swap is. A swap is a combination consisting of two conversion counter transactions with different currencies for the same amount, but in the equivalent of one.
The mechanism for calculating a swap is approximately the same. When a trade transaction is made in the Forex currency market, the currency that the trader buys is virtually put into a bank deposit, and the sellable currency is sold on credit. If the position on the currency pair is swapped, then its state (size and volume) is saved until the next swap.
In the case when the interest rate on the depositmore credit rates, then a swap will be credited to the trader's trading account. Quite possibly, and vice versa, when the loan rate will be greater than the deposit rate, then in such a case the swap will not be charged, but written off from the trading account. That is, payment for swapping ("negative swaps") or additional payments (these are already "positive swaps") arise due to different interest rates available on deposits and loans in different currencies.
Currency swap is an agreement betweenparties, which gives them the opportunity to exchange denominations in different currencies and with fixed interest on a certain schedule for a specified period of time.
If the delivery date for the futures market isit is stipulated preliminary in the futures contract, then in the Forex market, since it is spot, the delivery of currency is made on the next day. This means that if a trader bought the euro today and sold the dollar, then this operation, in theory, he should implement in reality the next day. But the trader earns on the difference in exchange rates and the currency he does not need is just an instrument. Here and there is a need for a swap.
In fact, a swap is a charge that is levied onForex market for moving through the night of an open position. Swap Forex for each country has its own interest rates. At night, the trader's position is closed and immediately opens a new one, thereby giving him the opportunity to avoid until the next day the delivery of currency in reality. And while the position remains open, the swap operation is repeated, and the delivery date of the currency is thus transferred. If a trader manages to open and close his position during the day, then he does not need a swap operation.
Swapping takes place literallya few seconds. We can say that the position to be closed and reopened is almost identical, with the only difference being that the trader will either write off a small commission or, conversely, credit it. This is due to the different interest rates of traded currency pairs, set by the Central Banks of each country.
Swap is also an instrument through whichexcludes interest rate risk. Whether a swap will be charged or, conversely, will be relieved entirely depends on the ratio of interest rates of a specific used currency pair.
The swap operation takes place in the trading terminalMetaTrader at 21:00 GMT and is automatically converted to US dollars. Swaps from Friday to Monday accrue only for one day, while from Wednesday to Thursday they are charged in triple.
What is the reason why the biggest swapis it written off or charged precisely on these days of the week? If you recall once again the peculiarities of the Forex market, it turns out that the transfer from Wednesday to Thursday of the date of the conclusion of the position is equivalent to the transfer from Friday to Monday of the settlement date - for as long as three days. It is possible for a trader to charge a swap for three days, but it is possible that they will write off the swap, but again in three days.
The swap operation affects the formation of profits. Therefore, it is so important to understand its principle. By the way, there is a certain category of traders who quite successfully earn on a swap. Transactions of this type are called "carry trade" deals.