The Swap Rate refers to the rollover interest rate for holding overnight positions in trading. It defines the cost or earnings obtained from holding a currency pair position overnight after the trading day has concluded. Vantage seamlessly adjusts your trading account to reflect either potential gains or losses associated with this funding cost.
By understanding the concept of Swap Rates, you can better anticipate potential costs and returns, thus strategically planning your trades.
Vantage offers swap-free products from time to time. Refer to our website for further information.
HOW IS SWAP RATE CALCULATED?
Swap rates are calculated by online brokers based on the differential interest of currency pairs when positions are held overnight. At the end of a trading day, you have the choice to keep your position open, which results in accruing interest. Brokers either add (pay) or deduct (charge) this swap rate to your account.
This practice is commonly followed in markets like forex trading and gold trading. The interest is generated from overnight fluctuations in exchange rates when the financial markets are closed.
Swap rates can be influenced by various factors, including prevailing interest rates set by central banks, market liquidity conditions, the specific currency pair being traded, and any additional fees or adjustments implemented by the broker.