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What is a Swap in Forex? – Swap Rate Calculation

This article is related to What is a Swap in Forex Trading? And also I will show you, how to Calculate Swap value? In Forex Trading, a Forex Swap, Foreign exchange swap, or even FX swap is a derivative contract which two-person exchange any financial instruments. It can be almost any kind of financial instruments, but most swaps based on principle amount that both parties are agreed swaps involve cash flows instrument. Usually, in forex if you have opened any position (trade), and you hold your position more than one day then it will charge you swap it can be positive or negative amount depending on the forex pair you trade swap amount is generally fixed which you will need to ask from your chosen forex Broker, that is, based on a benchmark interest rate, floating currency exchange rate or index price. This is called interest as well so all Muslim should have swap free account.

As our recommended broker is XM, XM also charge swap if you trade with XM and opened any position, if you keep open your position until their server time (Cyprus Time) GMT +2 and Pakistan time is GMT + 5 so you can see three hours difference from Cyprus if you closed the position before 12:00 AM Cyprus time you will not get any swap charge and if you keep open position 12:00 AM then it will charge you swap, however, all XM traders can request for swap free account or Islamic account from the member area by clicking on ISLAMIC REQUEST APPLICATION.

How to Calculate Swap Value?

Formula: Lots x Buy Position OR Sell Position x Point Size
All forex brokers have fixed amount for swap on the pair for buy position and for sell position also
Point Size = Contract Size x Minimum fluctuation price
EXAMPLE: XM >You trade EURUSD 1 standard lot buy position on Monday morning and close on Tuesday.

Calculate Swap Value:

Minimum fluctuation price and the fixed amount of the swap for buy position can find from here > http://www.xm.com/forex-trading
So, as per formula = Lots x Buy Position OR Sell Position x Point Size
Point Size      = 100,000 x 0.00001
Pint Size        = 1
Swap for one day = Lots x Buy Position OR Sell Position x Point Size
= 1 x -5.6 x 1
Swap for one day     = -5.6USD

Please Note:

  1. Please note that swap result always in a secondary currency of the pair like in EURUSD answer will be in USD and id JBPJPY then answer will be in JPY then we need to convert the answer into account base currency.
  2. If you open position on Wednesday morning and close on Thursday then it will charge you triple swap means if one day swap is -5.6USD it will charge you -5.6×3 = -16.8USD because on weekend broker does not charge swap i.e. if you open position on Friday and you closed on Monday it will charge you one day only, but they cover on Wednesday if you hold position Wednesday night they will charge you triple swap.

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