ionone wrote: Sat Apr 13, 2024 3:22 am
I don't like swaps
If you keep an order opened severals days, the swaps can easily eat all the profits
I know about islamic accounts but how does it work ? I think brokers will get their money another way
is Swap only in CFDs accounts ? is there some forex brokers without swaps ?
thanks
Jeff
Swaps are the daily interest charge you pay for borrowing the leverage you use. The basic calculation is, (number of contracts x value of contract x swap rate).
When you go long you borrow leverage to buy and you pay interest.
When you go short you borrow asset to sell and are paid the interest.
So when going short you can be credited but when interest rates are low and broker fees are applied that credit might turn into a debit.
The cost is usually calculated by the broker at 10pm daily and on Friday at 10PM you are charged x 3 (for Friday plus the weekend).
You can avoid swaps by trading on the Futures market instead (FX called Forwards market), not available on MT4 but will be on the brokers platform. Instead of a daily interest charge you pay a larger spread.
The Futures market was specifically designed for longer term traders and as a rule of thumb if you intend to hold a trade longer than 1 week it's more cost effective to use the Futures market but less than a week then the normal Spot (cash) market is more cost effective.