Swap:
It is the difference between interest rate of the countries. Consider a pair, GBP/JPY the difference between GBP interest rate and JPY interest rate gives us the swap. If you buy GBP and sell JPY then the SWAP will be positive, because we were holding the currency with high interest rate. If you buy JPY and sell GBP then your swap will be negative. But the swap is very small amount, because it is the difference of overall interest rate of the currencies we were holding in trade. Simply if trade size is small swap is small, if position size is large then swap is large.
In general if the trade position is long then positive swap. If position is short then it is negative swap. We can say there are two types of swap Positive swap and Negative swap
Positive swap is taking credit from low interest currency and investing that in high interest currency. You will get more interest for your deposit and you have pay less interest for your credit.
Negative swap is taking credit from high interest currency and putting that amount in low interest currency. You have to pay more interest for your credit and you will get less interest for your deposit.
- Swap changes overnight with a period of every 24 hours.
- 09:00 PM (GMT) the new day starts because the New Zealand market starts at 09:00 pm (GMT) every day
- After the market starts the swap rates will be added to your trade position. So, every day when it is 9:00 pm (GMT) swap comes into action.
Some brokers provide swap free accounts to their customers. From swap free accounts you will lose nothing in form of swap and also gain nothing if trade position has positive swap, broker will takes it.