What is Swap on Forex Market?

Any beginner willing to trade forex has to face confusing terms, any of which has its value. Therefore, before starting trading even on a demo account, it is recommended to study forex terminology first. What is swap? Novice traders too often begin to inquire about its meaning only when their losses become significant. If your deal freezes for a long time, you may lose money. Therefore, beginners should get to know what is swap in forex. This is not necessarily a loss; there is a positive side of it as well.

A swap concept implies that, once you leave a deal for the next day unclosed, you pay for that. In English sway means exchange, which is much the same as in forex: it is counted by the open currency purchase and sell deals. Swap is what the traders may face only in long-term or medium-term operations.

In case you have sold a currency, it is to be at the buyer’s on the following day; but what’s supposed to be if an order remains open during the trading day? After the trading day is over, the order has to be closed so that all the accounts are made up. When a new trading day comes, a new order shall be opened, it will be the same as the closed one. In such case a trader has spread losses and swap loss or profit. That is, he receives interest for having used the currency.

Opening a new deal it is important to understand that it is already losing money in the amount of the spread; therefore swaps are not being taken into consideration in the intraday trading operations. You do not pay to transferring the deal to the next day. Once a trader understands what a swap is, he know which impact it has on the profit and its amount. Novice traders should learn not only the basic terms, but also the nuances, such as a transfer from Friday to Monday, or parameters influencing over the swap cost. Trading should be started only after learning, demo account training, and it is advisable to read articles on forex written by experienced traders. This will help you to avoid losses and to minimize the risks when trading.

Trading synthetic currency pairs

A synthetic cross currency pair refers to an artificial combination of currencies usually not available in the market. If you are taking your first steps in the Forex market...

Easy ways to avoid scammers in Forex

The Forex market is not a scam. In fact, it is an amazing place to make money. Unfortunately, dirty scammers (which operate not only in the Forex market...

Using the Wrong Order Type

Trading with real money should be viewed as a serious business. As such, you should take the time to ensure that you thoroughly understand the most basic...


Instrument Understanding

Being over-the-counter products, there are a great many differences in the specifications of contracts available as CFDs. If you are trading these products...

Pros and Cons of Investing in Bitcoin

Cryptocurrencies have been in the spotlight in 2017, and their uptrend is still not over. Last year in April, Bitcoin- the main representative of cryptocurrencies...

Start paying attention to position size

When it comes to risk management, everything counts. And defining the right size for your position plays a key role in the equation. Intuitively...


Trading journal: should you keep one?

There are so many Forex blogs out there. Sometimes I think too many actually. But some of them are pretty useful (like ours, of course) and a common...

Poor trade management

While traders frequently commit an inordinate amount of time to selecting, planning and executing new positions, they often make the mistake of exiting..

How to 'trade the news' in forex?

I am sure you've heard of it. The term 'trade the news' refers to those guys who would rather read newspapers all day instead of sitting...

  


Share: