If you are venturing into the world of trading, you have surely come across the term "swap." Don't worry, we are going to unravel this concept in a clear and straightforward way.

Definition and functioning of swap in trading

The swap is basically the cost or benefit we get for keeping a position open overnight in the market. Think of it as the "rent" you pay (or receive) for keeping your trade active beyond the closing of the session.

What is the purpose of swap in trades?

The swap serves several purposes in the market:

• Compensates for interest rate differences between currencies

• Allows traders to benefit from favorable spreads

• Helps manage risk in long-term trades

When and how is the swap charged?

The charge or credit of the swap occurs at 23:00 GMT, known as "rollover." If you hold a position past this time, the swap will automatically apply to your account. Note! On Wednesdays, the swap is multiplied by three to compensate for the weekend.

Main types of swaps in the market

Currency Swap

This is the most common in Forex. Here we exchange the interest of one currency for another. For example, if you trade EUR/USD, you will be exposed to the difference between the interest rates of the euro and the dollar.

Interest Rate Swap

It is used to swap fixed interest rates for variable ones. It's like changing a fixed-rate mortgage to a variable rate, but in the world of trading.

Positive swap vs negative swap

• Positive swap: you receive money for keeping your position

• Negative swap: you pay for keeping the trade open

Calculation and costs of swap

How to calculate swap points?

The general formula is:

Puntos Swap = (Tipo de interés de la divisa comprada - Tipo de interés de la divisa vendida) × Valor del pip

Puntos Swap = (Tipo de interés de la divisa comprada - Tipo de interés de la divisa vendida) × Valor del pip

Puntos Swap = (Tipo de interés de la divisa comprada - Tipo de interés de la divisa vendida) × Valor del pip

Impact of swap on trades

The swap can significantly affect your account if:

• You hold long-term positions

• You trade with large volumes

• You work with currency pairs with large interest differentials

Strategies to manage swap

Carry Trade

This strategy seeks to benefit from positive swaps. It involves buying a currency with a high-interest rate and selling another with a lower interest rate.

How to avoid or minimize swap

Some tips:

• Close positions before rollover

• Trade with currency pairs with small spreads

• Use intraday trades

Swap-free accounts

Some brokers offer Islamic accounts without swap, although they usually have other alternative fees.

Swap in different instruments

Swap in Forex

This is where it is most used, especially in trades involving currencies with large interest rate differences.

Swap in CFDs

CFDs also have swaps, but they are calculated differently depending on the underlying asset (stocks, commodities, etc.).

Practical examples of trades with swap

Imagine you buy EUR/USD:

• If the EUR rate > USD = Positive swap

• If the EUR rate < USD = Negative swap

Keep in mind that the swap can be your ally or your enemy. The key is to understand it and use it to your advantage. Have you had any experience with trades involving swap? Tell us in the comments!