Glossary of Terms

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Below is a glossary of terms that are used in the online trading industry. Select the first letter of the word you are seeking from the list above to jump to the appropriate section of the glossary.

Swap

What is Swap?

Swap is the overnight charge/credit amount for an open position. The amount reflects the interest rate difference between the central banks (based on market rates and spreads) of the two assets involved. Swaps are credited or debited once for each day of the week, with the exception of Wednesday, on which they are credited or debited 3 times their regular amount. The swap charge is accrued daily at 20:59 GMT.

How are traders affected by swap charges?

Swap charges are released on a daily basis by the financial institutes which Fortrade works with, and are calculated and determined according to various risk management criteria and market conditions. The swap premium is calculated in the following manner:

Pip Value (depending on trade size) * Swap rate in pips * Number of nights = Swap charge/credit.

Forex Example:
You open a short position (Sell) on EUR/USD for 1 lot with an account based in USD:

  • 1 Lot = 100,000
  • 1 Pip Value = 10 USD
  • Swap Rate = -3.2839 Points (equivalent to 0.32839 Pips)
  • Number of Nights = 1

Swap Premium: 10 * 0.32839 * 1 = 3.2839 USD

CFDs Example:

You open a long position (Buy) on Crude oil for 1 lot (1,000 barrels) with an account based in USD:

  • Swap Rate = -0.3807
  • 1 Cent Value = 10 USD
  • Number of Nights = 1

Swap Premium: 10 * -0.3807 * 1 = -3.807 USD

Links related to Swap
Central Bank (CB)
Currency Pair
Foreign Exchange
Interest Rate
MetaTrader 4 (MT4)
Overnight Position