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What is swap?

Dec 19, 2023

Swap is an interest applied each day to orders open overnight until the order is closed. Depending on the day and trading instrument, swap can be applied as standard, triple or not applied at all.

Swap rates

The rate of swap varies widely as each trading instrument determines these rates in a number of ways. For example, swap is applied triple on Wednesdays for most forex and metal (Commodities) instruments.

Factors that impact swap include for a particular instrument include:

1. Interest rates of central banks

2. Currency pair exchange rate (when applicable)

3. Order type (short for sell or long for buy)

4. Broker's commission

Triple swap

Triple swap is applied when the settlement date of the instrument lags behind closing the order. Since most forex trading instruments take up to 2 working days to settle. Therefore, triple swap is applied to account for the 3 days the order must be maintained overnight.

For Energies (under Commodities), there is no triple swap. There is a single overnight charge for each day of the week.