What are Swaps?

What are Swaps?

Swaps are the cost or benefit of holding an FX position overnight. They are based on the prevailing interest rates of the currencies traded. These are displayed as debits or credits on your MT4 terminal under the "Swap" column in the "Trade" panel.When you enter an FX trade, you are essentially borrowing one currency to buy another. If you buy GBPUSD, you are borrowing US dollars to buy GBP, therefore paying interest on the dollars you borrow but earning the interesting on the GBP bought. This results in either a charge on your overnight positions if you are borrowing a currency that has a higher interest rate than the one you are buying or a receipt if the currency you are borrowing has a lower interest rate than the one you are buying.

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