Hey everybody welcomes we’re adding a little lesson in between other lessons so bear with us. Trading or FX trading swap is the interest paid at the time of rollover, every day the currency market sort of rolls over at about 5 p.m.
I was being really careful this time night to draw, slowly yeah maybe it was because I zoomed in and if I gotta wait till that thing disappears at about 5:00 p.m.,eastern US time your FX dealer will roll your trades over you will not probably see anything different about them but you’ve carried trade from one day into the next. Sometimes this is also referred to as the carry trade or you’ve carried trade from one day into the next.
Alright so what is this, inside of your platform when you take a trade and will view the terminal window, inside of Metatrader? Here one of the items that you’re going to see in your terminal window on the right side inside, the terminal window part of your open trade is swap. Swap is the interest that you either earn or the interest that you pay for holding on to trade overnight. Generally you will not earn or pay anything if you do not hold that trade through 5:00 p.m. eastern US time or whatever time your broker uses but some dealers will charge or pay interest on a minute-by-minute basis. Check with your Forex dealer to find more information. About that why do they do that well; in the big world of trading every Central Bank around the world has an interest rate and you could see this on the nightly news especially the business news central banks set base,interest rates so a central bank in,Australia might have a 6% interest rate,a central bank in Japan the Bank of,Japan might have a 0.25 interest rate.
Nate no this is obvious but which number,is higher the six is higher so this is,Australia this is Japan so if you’re,playing along at home let me ask a,question Alaska to Nate and you can take,a moment to answer if you buy the,Australian dollar / Japanese yen and you,hold it overnight will you earn interest,or pay it you’re going to earn it,because the Australian interest rate is,higher now the reason this is a this,exists is a mystery to most everyone and,it’s been forgotten but in the old days,you are holding on to something,overnight in your bank account and you’d,get paid interest on your holdings just,like you would and on an annualized,basis you’d get paid a little bit of,interest to holding on to a high,interest pair against a low interest,pair if you’re holding a high interest,pair against a high interest pair you,might even get charged a little bit of,interest if you sell the Australian,dollar Japanese yen you’re short the,Australian dollar and you’re buying,Japanese yen in that case you’re going,to pay interest if you hold that trade,overnight for simple calculations on,swaps you can go to FX swap well it’s,not doing anything you can type into Google.
I’ll just write it down here for,you,you can type in FX,swap and I have two types I have to,write slowly so it doesn’t move the,monitor FX swap calculator and a series,of websites will come up and you can say,oh I’m buying the u.s. dollar Japanese, yen or I’m selling the British Pound US, dollar and you can type in your trade, size Siri thought I was talking to you, here that Siri was just answering, nothing that I asked her that’s pretty, funny if you google that you can find, calculators that will show you the overnight rate that you get paid or, charged generally this is a small amount, of money and does not mean a lot or, factor into your trading unless you’re, holding on to something for a very very, long time. We’ll see you in the next one.