When you trade in the Forex market, there's a small but important detail to consider if you keep positions open overnight: Swap. Here's a clear explanation of how it works and how you can calculate it.
Interest rate differences between currencies
Each country has its own central bank, which sets an official interest rate for its currency. These rates can vary significantly from one country to another.
🔸 For example, the interest rate on the US dollar (USD) is often much higher than that of the Japanese yen (JPY).
What happens when you buy or sell currencies?
When you make a Forex transaction, such as buying USD/JPY, you're essentially:
✅ Receiving a currency (USD) with a higher interest rate
❌ Giving away a currency (JPY) with a lower interest rate
📈 If you buy USD/JPY (long position), the bank might pay you interest daily for holding that position.
📉 If you sell USD/JPY (short position), then you’ll pay interest to the bank each day the position remains open.
How are swap points calculated?
Swaps aren't calculated randomly. They're based on:
🔹 The difference in interest rates between the two currencies
🔹 The type of position you’ve taken:
- Long if you bought
- Short if you sold
🔹 The lot size and how many days you keep the trade open
Where can you check swap rates?
There’s a specific table with real-time updated Swap values. It’s called:
📍 You can find it in your MetaTrader platform:
Click the "Specifications" button in the toolbar
Or check it directly on your broker's website
💡 Keep in mind: Swap rates change frequently because central banks adjust interest rates over time.
📌 In summary
Swap depends on the interest rate difference between the two currencies.
You may earn or pay interest depending on your position.
Always check Swap conditions before holding trades overnight.
This info is easily accessible on your trading platform.