What's SWAP?
What is SWAP?
In simple terms, a swap is an interest rate that is paid or charged to you at the end of each trading day.
Let's consider this in more detail using the example of buying a EUR/USD pair. For this transaction, the trader takes a loan from a bank through a broker at an interest rate and immediately places it in the form of a deposit in euros. The conditions for calculating interest on a deposit are similar to those for calculating interest on a loan, only the interest rates differ.
When a trader closes a trade, they must pay an interest rate in dollars and receive interest on a deposit in euros; the difference between these rates is a swap. If the trader closes the position during the day, they will not need to pay the swap. But if the trader closes the position the next day or a few days later, then the swap must be paid to the bank.
In order to independently calculate the swap when trading with leverage, it is not enough just to calculate the difference between interest rates. The final value of the swap depends on a combination of factors:
- Current interest rate difference between two currencies
- Price dynamics of a currency pair
- Forward market behavior
- Swap values of the Counterparty
- LIBOR rates, etc
For this reason, the swap value is dynamic, that is, it can change every day.
You can view the current swap on a real or demo TickTrader account:
- Right click on an instrument in the Market Watch window
- Select Properties
- You will see 'Swap Long' and 'Swap Short'
It is important to understand that swaps on FOREX and Commodity CFDs are expressed in pips. And the swap on instruments such as CFDs on indices, stocks and on Cryptocurrency is indicated as a percentage.
Swap Calculation Method for FOREX and CFD Commodities
The cost of 1 pip per 1 lot is specified on the Trading Conditions page. For convenience, we will use the values from the specification in the calculations. You can independently calculate the cost of 1 pip using the formula and examples from the Knowledge Base: 1 pip value for 5th decimal pricing and 1 pip value for 4th decimal pricing.
Formula: 
Example 1. Your trading account is in USD. You have opened a position BUY EURUSD, 0.65 lot. Swap Long = -10.56 pips. SWAP will be calculated as follows:
SWAP = 0.65 * 1 * (-10.56) = -6.86 USD
Example 2. Your trading account is in USD. You have opened a SELL XAUUSD position, 1.45 lots. Short Swap = 18.08 pips. SWAP will be calculated as follows:
SWAP = 1.45 * 1 * 18.08 = 26.22 USD
Swaps are calculated daily at the end of the trading day. If it is necessary to convert the total amount into the deposit currency, then this procedure is carried out at the average price at the time of swap accrual: (Bid+Ask)/2.
Swap Calculation Method for Cryptocurrency, CFDs on Indices and Shares
First, the amount of borrowed funds is calculated based on current prices, which is multiplied by annual interest. Since swaps are calculated daily at the end of the trading day, the calculated amount of the annual percentage for the position is divided by 360. If it is necessary to convert the total amount into the deposit currency, then this procedure is carried out at the average price at the time the swap is calculated: (Bid+Ask)/2. The same method of calculating the average price is used in the formula for the 'current average price'.
Formula:
Example 1. Your trading account is in USD. You have opened a BUY BTCUSD position, 2 lots at 25650.00 USD per 1 BTC. Long swap = -10%. SWAP will be calculated as follows:
Example 2. Your trading account's in USD. You have opened a SELL #NDXm position, 1.5 lots at 14150.00 USD per 1 contract. Short Swap = 3.182%. Swap will be calculated as follows:
Example 3. Your trading account's in USD. You have opened a BUY AAPL position, 5 lots at 189.00 USD per 1 contract. Long Swap = -1.5%. Swap will be calculated as follows:
It is important to remember that:
- Swap only applies to leveraged margin trading.
- The swap can also be positive. In this case, the broker pays it to the client.
- Transactions are made in T+2 mode (calculations are made on the second business day after the transaction), which means that from Wednesday to Thursday (at 00:00) the swap is charged for the past weekend and Wednesday. However, for positions open for more than 3 days on a weekend, the swap is charged for only 1 day.
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