Inside Trade | Swap

Every trade opened before 1700 EST and retained after it, is considered to be carried over to the next trading day. An interest is charged or paid for every position carried over the next trading day.

Swap is the amount of money deducted from or added to a client's account for the overnight position.

Swap may occur when two opposite positions with different settlement dates is opened simultaneously.

After the opened position is closed, another would quickly open thus serving its purpose; to carry over the opened position to the next trading day. It may result to either a positive or negative swap. The result is dictated by the difference in deposit and credit interest rates.

The swap rate and cost is set at the moment of trade execution. The bought currency of a quotation is taken as a deposit while the sold one is the credit. If the deposit rate surmounts the credit, the swap is accrued to the account. If the credit rate exceeds the deposit, then the swap is deducted from the trading account. A triple swap is conducted every Wednesday.

The difference in the interest rates had bred a new kind of strategy called Carry Trade. It is intended to generate additional profit through the process of acquiring positive swap.