What are SWAP points?
SWAP points are the values that are charged for the so-called “overnight positions”, applicable to all active positions. They are usually the result of interest rate differences between different currencies.
It is worth remembering that SWAP points are not accrued at the opening or closing of positions, but only at the time of extending the duration of positions for the next day (that is, at midnight broker time), which are currently active.
SWAP points – an example
It will be easiest to illustrate this with an example. If you are a so-called “day trader” and conduct operations based on fast trading, and your positions are opened and closed within one day, then SWAP points will not cover you.
On the other hand, if you are a trader who is primarily oriented to medium- and long-term investments, then you have to reckon with the accrual of SWAP points at the end of each day in which the markets work.
What mechanism leads to the creation of SWAP points?
SWAP points are derived from the difference in interest rates between the currency pairs in question. Thus, they allow to reflect the disparity of interest rates in different countries. They can also result from storage costs, expressed, among other things, for precious metals and raw materials.
Remember – each broker has its own SWAP points
It’s very important to remember that each Forex broker has individual SWAP points tables, where you will be able to find specific SWAP rates for each currency pair, or other CFDs.
Values vary – check your broker reliably
It is worth meticulously reading the provisions on SWAP values. Some brokers do not charge SWAP points for positions held on CFDs on stocks or stock indexes. At the same time, it is worth remembering that some brokers, in turn, impose very large fees!
How are SWAP values calculated?
Almost all brokers provide values in points, which are then converted according to the size of the position held in the instrument and against the base currency of the account, or the one you want to use.
In Poland, there are brokers who usually provide on their sites specific rates in PLN per lot of a given financial instrument.
When are swap points calculated?
Swap points are usually added to the balance of the open position, which is shown in the SWAP column. In Poland, this happens between 11:00 p.m. and 00:00 a.m. For weekend values, they are accrued in the middle of the week, accumulating SWAP on Wednesday to triple, or on Wednesday and Thursday to double.
As a result, if we decide to open a position on Friday and hold it until Monday then SWAP will be charged only for the roll over from Friday to Saturday. In the event that we open a position on Wednesday and hold it for Thursday then we can expect to be charged double or even triple.
For which investors are SWAP points important?
First of all, for long-term traders who choose to hold one position for weeks or even months. The importance – although much smaller – of SWAP points will also be for medium-term traders.
