Calculating Swaps
WHAT IS A SWAP
A foreign currency swap, commonly known as an FX swap, is an agreement between two foreign parties to exchange currencies. The agreement entails exchanging principal and interest payments on a loan in one currency for principal and interest payments on a loan in another currency of equal value.
When a trade is held open overnight, a swap rate is credited or debited as a rollover interest rate. When a position is rolled over, the swap rate is credited or debited once for each day of the week.
SWAP CALCULATION
On your open positions, you can determine the interest rate differential between the two currencies of the currency pair.
Choose your account’s base currency, a currency pair, an account type, a trade size in lots, and leverage.
The following is how the calculation is done:
Swap = (One Point / Exchange Rate) * Trade Size (Lot Size) * Swap Value in Points
EXAMPLE
One Point: 0.00001
Account Base Currency: EUR
Currency Pair: EUR/USD
Exchange Rate: 1.0895 (EUR/USD)
Volume in Lots: 5 (One Standard Lot = 100,000 Units)
Short Swap Rate: 0.15
Swap Value = (0.00001 / 1.0895) * (500,000 * 0.15)
Swap Value is €0.69
*If the result is negative, you will lose money; if the result is positive, you will make money.
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