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What are Swaps? Swaps are a procedure that is performed inorder to avoid taking physical delivery of a currency.
Most speculators never intendto take delivery and are only looking to gain on the fluctuations in price.
Because of this,there is a daily swap procedure also known as "rollover".
In the interbank market, positions are simultaneouslyclosed and opened at a slightly different rate to account for varying exchange ratesbetween countries in which the currencies are being traded.
In the retail foreign exchange market, mostbrokers simply debit or credit the amount to avoid confusing a new position with theoriginal position.
This is the way most retail and institutional traders prefer the processto be handled.
How Swaps affect you as a customer.
Depending on what currency pair is being held,swaps can have a negative or positive effect on a trade.
As an example, somebody holdinga long AUD/JPY position would collect positive swaps since the interest rate in Australiais much higher than the interest rate in Japan.
If a trader is short AUD/JPY, they would receivenegative swaps on that position.
Traders need to take this into account when deciding ona strategy.
What benefits do our customers receive fromour competitive rates? At ThinkForex, we offer very competitive swaprates to our customers.
We are right in line with interbank rates and this can make a bigdifference to a trader.
Many brokers don't give enough positiveswap and charge too much negative swap.
This can really harm a trading strategy.
"Swap"your current broker for ThinkForex and come see the difference.
ThinkForex – The Smart Way To Trade Forex.