Swaps | Rollover Trade | Carry Trade | Interest Rates

Swaps | Rollover Trade | Carry Trade | Interest Rates.

swaps in forex refer to the interest earned or paid for keeping a trade open overnight.

So there are two kinds of swaps for long positions and short positions.

5 pm (EST) or 2 am (Pakistani time).

Current Central Bank Interest Rates

Central Banks Interest Rates

So first all you must learn it that Central Banks lend money to commercial Banks at a certain annual interest rate.

However, these above Interest rates from central banks to commercials bank not public or business.

This interest rate is also known as the discount rate.

Each country has a different discount rate as mentioned above.

Interest Rates updated   30  June 2020.

Now I will teach you how Central banks apply swaps when you place an order and holding overnight.

This so simple when buying currency with the high-interest rate it means you will get paid and when selling the currency with the high-interest rate you are paying.

USD = 0% (Base Currency  – You’ll get Paid)

CAD = 0.25%  (Quote Currency – You have to Pay)

USD / CAD = 0% – 0.25 = – 0.25%

SWAP FOR BUY ORDER.

Contract Size X (Base Currency Interest Rate – Quote Currency Interest Rate + Broker Mark Up) /100 / Days Per year.

If a trader longs on USD / CAD by one standard lot on a Thursday

and keeps the position open overnight closing it on Friday.

The swaps long the formula looks like this.

100,000 X ( 0  – 0.25 + 0.15 ) /100 / 365

100,000 X – 0.10 / 100 / 365.

-10,000/100/365.

-100/365.

-0.27$  x 2 days = -0.54$ Unit s of Base Currency.

SWAP FOR SALE ORDER.

Now if the trader goes shorts on USD / CAD by one standard lot on Thursday.

And he only closes his position on the following Tuesday the swap formula would look like.

Contract Size X (Quote Currency Interest Rate – Base Currency Interest Rate +Broker Mark Up) /100 / Days Per year.

100,000 x ( 0.25 – 0 + 0.15) /100/365

 100,000 x 0.40/100/365.

40,000/100/365.

400/365.

1.09$ x 7 days = 7.67$  Unit s of Base Currency

 In this case, the same position is kept open until the following Thursday that

would make it seven nights weekends.

Therefore I taught more about swap now one thing is very important to understand either we open account with swap or without it.

While Muslim we should not open the count with it but you must keep in mind that you can earn money with the help of it.

 

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