What is Swap in Forex Trading?
Since currencies are always traded in pairs, we are always buying one currency and selling another at the same time. For example, if I long EUR/JPY, it means I am buying Euro and selling Japanese Yen. Therefore, I will receive interest from Euro but at the same time, I must pay interest on Yen. Swap in Forex means that we have to pay interest on the loan, but also receive interest on the currency we are holding. If we are receiving more interest than what we are paying, the account will be credited for the difference, and vice versa.
Brokers calculate swap differently. Some do it on a daily basis, normally at 4 pm Eastern, when New York closes. So if you have an open position at the time, your account will either be credited or debited depending on the currency pairs you long or short. Even if the position is opened 5 minutes before 4 pm Eastern, the brokers will pay or charge you the whole day worth of interest, and triple the amount on Wednesdays to make up for Saturday and Sunday when there is no trading.
Oanda, however, calculates the swap amount the second you long or short a currency pair. It does not matter if a position is held past over 4 pm Eastern, when the position is closed, the swap will be credited or debited from your account based on how long the position is held.
