In this article, we will give information about what is the least understood Swap subject during Forex transactions. To begin with a brief description, it is known as Swap: overnight transport position.
If we make a detailed sampling; Let’s assume that you have no money to use in Forex trading and expect the Dollar to gain value against the Turkish Lira. In this case, what you would do is to borrow TL from the bank, sell the TL debt you have received, buy the Dollar and deposit the Dollar in your Dollar deposit account.
The point to note is the fact that you borrowed in terms of the Turkish Lira you received and sold it and deposited it in your deposit account to earn interest. In short: the money you sell is borrowed, and the money you buy is lent.
How is Swap Calculated?
The swap is calculated by subtracting the overnight borrowing cost of the money sold from the overnight interest income earned by the money purchased.
Depending on interest rate differences and which position we carry, swap can sometimes generate returns and sometimes risky. When we look at these risks, if a forex investor has a high borrowing cost and a very high level of return on a very low parity, the investor’s cost of carrying a large amount of cost per night is reduced. In this respect, if the parity moves in a direction which the forex trader does not want, it may cause serious losses due to the position of the investor.
WE HAVE PREPARED AN ARTICLES ABOUT WHAT THE FORWARD OPERATION MIXED WITH SWAP FOR FOREX. IF YOU WISH, YOU CAN LEARN WHAT THE LIFTING PROCEDURE IS WITH THE ABOVE RELATED CONNECTION.
It can be difficult for investors to close positions, so brokers add the calculated amount as profit or loss. Investors can see that their positions continue uninterrupted.
Swaps can have positive or negative effects in buying or selling. Swap fees are calculated at 00:00 every night and placed in position. Swap fees are applied for one day on Monday, Tuesday, Thursday and Friday nights and three days for positions that do not open on Wednesday and close at 00:00.