Forex swap may influence your trading costs if you often hold positions overnight. Let's learn how to calculate swap fees in this article.
In forex trading, there are many important terms that traders should know. The forex swap is one of the most underrated terms, yet it is one of the most important as it can affect your potential profits or losses.
In this post, we're going to talk about forex swaps in one of the leading forex brokers, Exness. Hopefully, by the end of this guide, you'll be able to calculate your swap fees and know how to use them to your advantage.
What is a Swap Fee?
Every country has a different interest rate for its national currency, and this rate often changes from time to time. This is why some interest rates are higher and others are smaller.
For example, let's say that the interest rate in Australia is 2% and the interest rate in the US is 0.25%. Traders who want to trade with the AUD/USD pair must either pay or receive the difference between the two currencies' interest rates.
Such difference is what is referred to as a swap.
Swaps can either be long or short depending on the type of position you've opened (Buy or Sell). Swaps can also either be positive or negative, so you can either pay a fee or you will be paid a fee for holding your position overnight.
If a Buy position is left open overnight, the trader will have to pay interest based on the USD interest rate and will receive interest based on the AUD rate.
In other words, the trader will obtain 2% (AUD rate) and pay 0.5% (USD rate), so the trader will get a 1.5% swap per lot. On the other hand, if the trader opens a Sell position and left it open overnight, then they will get a negative swap of -1.5% per lot.
When Does Exness Charge Swaps?
The exact time at which the swap is charged to your live account depends on your broker. Most brokers charge swap fees at around midnight, but Exness applies the fees at 22:00 GMT+0 each day except for the weekends until the position is closed.
It is worth noting that sometimes the swap will be charged for opening a position over the weekend. In Exness, the amount of swap is charged on Wednesday (or Friday for Energies) at a triple rate after a few days to compensate for the next weekend, during which swap is not applied.
That being said, if you hold your position overnight on the day that weekend swaps are charged, you will get swaps three times bigger than the normal swap.
Finding Swap on Exness MetaTrader
If you trade with the MetaTrader trading terminal, you can see your swap amount at any time by following these steps:
1. Log in to MetaTrader with your trading account.
2. Open the View tab.
3. Open the Market Watch.
4. Choose one pair, right-click, and then click Specification.
5. Scroll down until you find the Swap section.
How to Calculate Swap Fee on Exness
Swap fee calculations can be quite complicated depending on the broker you use. If you trade with Exness, you can easily check your swap amount from your trading platform.
Simply open the platform, log in to your account, open the Trade tab, and look at the swap amount on the left side of the screen. However, keep in mind that this feature is only available on MetaTrader 4.
If you want to calculate your potential swap amount before opening a trade, you can use the Trader's Calculator on the broker's website or you can do it manually by using the following formula:
Lots x Contract Size x Pip Size x Swap Short or Swap Long x Number of Days
Here's an example:
Let's say you used a Standard account to open a Buy position for 1 lot of EURUSDm on Tuesday at 15:00 and then closed the position on Thursday at 23:00.
Since it's a Buy position, then you'll need to use the swap long rate for calculation. You can check the broker's Contract Specifications for this. In this example, the swap rate is -0.86852.
Also, the position was held overnight from Tuesday to Wednesday, a total of 3 days. Each day uses a single swap, while on Wednesday the swap is tripled. So, in this example, the total swap charged is 5 days.
Now that we have every figure we need, we can input them into the formula.
1 x 100,000 x 0.0001 x (-9.86852) x 5 = -44.42 USD
Since it's a negative swap, then the amount will be deducted from your account.
Is It Possible to Make Money from Swaps?
As explained above, swaps can either be positive or negative. This means swaps can either make you pay interest or earn money from the trade.
In forex trading, there's actually a strategy that allows you to make profits by using swaps. This strategy is called carry trade.
Carry trade involves making a trade where you borrow in a currency with a low-interest rate and invest in a currency with a high-interest rate. In the previous example, this translates to borrowing USD and investing in AUD.
Since the strategy focuses on the difference between interest rates, it's important to choose two currencies that have a significant difference in rates.
Exness allows traders to carry trade and doesn't apply any restrictions for doing so. This makes it possible for Exness clients to gain profit from swap differences in their trading instruments.
Nevertheless, it's worth mentioning that the strategy is not free of risk because unexpected market movements might eliminate the profits made from collecting the daily swaps. This is why carry trading is more appropriate for big traders who like to hold positions for a long time.
Does Exness Provide Swap Free Account?
What if you want to eliminate swap fees altogether?
Some brokers have Islamic swap free accounts that do not charge forex swaps to positions held overnight, and yes, Exness is one of the brokers that provide swap free accounts.
This account is applied automatically and is only available for Muslim traders who live in Islamic countries. That is because according to Sharia law, lenders are not allowed to charge interest, so swaps are simply forbidden.
Keep in mind that if a client is found to have abused the swap-free status attached to their accounts, Exness may cancel the swap-free status on the account and start applying swap charges for any open orders as well as orders opened in the future.
For more information on Exness, please refer to the information below:
The choice of broker is adjusted to the needs of each trader. If you are a trader who only needs a basic platform and trading features with the best attributes, then Exness can be your best choice.
Exness covers its lack of feature variations with other advantages like low spreads starting from only 0.1 pip. This is very suitable for traders who use scalping strategies (Scalper). Spreads on major pairs in certain account types can also be as low as 0.0 pip, depending on market conditions.
Not only that, but traders can also enjoy other advantages such as automatic fund withdrawals. Exness processes the majority of client withdrawals instantly, without manual checks; however, withdrawals may be subject tos depending on the payment provider or method of choice.
The safety of traders' funds is also guaranteed as Exness is one of the European-based STP/ECN brokers. Exness's ability to become an official partner of the Real Madrid soccer team for 3 years, starting July 2017, also provides evidence that the company has high solidity.
Deposits and withdrawals may be made 24 hours a day, 7 days a week. However, it is important to note that the company shall not be liable fors in processing deposits and withdrawals if suchs are caused by the payment system.
Traders do not need to worry about transaction fees when depositing and withdrawing. Exness doesn't charge any transaction fees to traders even though some charges may be incurred depending on the payment provider of choice. A variety of payment methods are provided for traders, including Wire Transfer, Bank Card, Neteller, Skrill, and many others.
The financial reports and metrics on the Exness website are audited quarterly by Deloitte, one of the four largest public accounting firms globally.
Moreover, Exness is one of the mote transparent brokers in the online trading industry. Traders can find out all information about this company on the website, such as trading volume, number of active clients, client deposits, company funds, and many more.
The platforms provided by Exness vary in MetaTrader 4, MetaTrader 5, Web, and Mobile platforms. This makes it easy for traders when trading on Exness, as they can also access Exness platforms anywhere and anytime.
Over the years, Exness has developed into a broker that attracts traders. Trader's trust is further enhanced by its compliance with financial regulations like the FCA and CySEC.
One measure of client confidence can be put on the trading volume. By December 2018, their clients' monthly trading volume reached USD348.4 billion and active traders around the world surpassed 50,342.
Through the program offered by Exness, traders also have the opportunity to earn extra income by becoming their partners. From the Introducing Broker (IB) program, partners can earn up to 33% spread commission from every new client that registers with them.
Additional income can also be obtained from Exness Partners. Traders can get a spread commission of up to 25% per transaction made by traders who register through an affiliate link.
When trading with Exness, clients can also make use of its free VPS hosting services. A VPS (Virtual Private Server) offers increased reliability and stability for traders as they can maintain their trades and expert advisors without interruption in the event of unexpected technical issues, such as internet or electricity downtime.
From the review above, it can be concluded that Exness is a favorite broker for traders because of low spreads and flexible account types. This condition is very suitable for traders with limited funds but is in need of more opportunities to get maximum profit. This broker is also well known for its maximum support on both new and existing partners.