What is swap in forex trading? How is it calculated
A swap is charged when a position is rolled over to the next day. In other words, it is a fee for holding your position overnight.
A swap fee depends on many factors just like the spread size. So, before opening a long-term position, we advise you to read about swap rates.
InstaForex strives to ensure favorable trading conditions for you and optimize the costs. That is why swaps are not charged for some categories of trading instruments.
offers zero swaps for two asset groups
- A buy trade is maintained by the client’s own funds.
To check whether this requirement is met, you need to compare the nominal value of each open trade either on stocks or crypto with free margin on a trading account added to the margin used for these trades. If a trade can be fully or partially maintained by the client’s own funds, a swap will not be charged on a proportional basis.
Let’s say, $1,800 is free margin on the account where a buy position of 0.1 lot is opened on BTC at a price of $60,000. The current margin needed for such a trade is calculated as follows: $60,000 * 0.1/5 = $1,200.
That is, to maintain this position, the client has $1,800 (current free margin) + $1,200 (current margin) = $3,000. This makes the nominal value of a trade (without leverage) $60,000 * 0.1 = $6,000. Therefore, the part of a trade worth $3,000 from a total trade size of 0.1 lot worth $6,000 will be exempted from a swap fee. This is 50% of a trade size, or 0.05 lot. In the meantime, a normal swap fee will be applied to the remaining part of a trade.
- The client opens opposite trades (buy and sell) on one asset which makes a position fully or partially locked. In this case, a swap is not charged for the locked size of a trade (neither for a buy nor a sell position).
Suppose you have a sell trade on #TSLA of 1 lot and an opposite buy trade on #TSLA of 0.5 lot. A swap fee will be charged only for 0.5 lot of a sell trade.
A swap is charged for all sell trades unless there is an opposite buy trade on the same asset or a sold asset differs from the account currency. For example, the account is in USD, and the client opens a sell trade on #Ethereum, thus borrowing it from the company.
Now let’s go over the steps of how a swap is charged.
The algorithm looks like this:
Please note that swaps on stocks and cryptocurrencies are displayed in the account history in the form of a separate balance record. On the Standard account, they will come as Stocks rollover/Crypto rollover.
We hope that this description of how swaps are charged was helpful for you. This is a great opportunity to avoid swaps on such volite assets as cryptocurrencies and stocks. For this, you just need to meet a few simple requirements.
InstaForex is happy to offer you the most favorable trading conditions. Open a trading account with us in a few simple steps. After verifying and topping up your account, you will be able to take advantage of the described conditions for trading stocks, cryptocurrencies, and other financial instruments