IronFX UK is one of the most competitive brokers with regards to swap rates in the Forex market.
Their overnight swaps are Institutional Grade and are on par with Tier 1 liquidity providers.
A ‘Swap’ or a ‘Rollover’ is the interest paid or earned for extending a position at the end of the day (4:59pm ET) without settling.
The swap rate converts net currency interest rates, which are given as a percentage, into a cash return for the position.
Based on the interest differential, a trader purchasing a currency with the higher of the two interest rates will be credited and vice versa.
Swap rates can potentially generate extra profit or loss to one’s trade.
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|Position Size:||1 standard lot, equal to 100,000|
|AUD Account:||i.e. Converted to the AUD|
|Calculation Formula:||Position Size * Pip Value * Swap Pip Rate * AUD Conversion Rate|
Example of Swap Point Calculation
An investor has a short 500,000 EUR/AUD at a rate of 1.2500.
The EUR interest rate is 0.75%, or a daily rate of 0.002%, and the AUD is 3% or a daily rate of 0.0083%.
The interest on the EUR is (500,000 * 0.002%) 10.00 EUR; the AUD costs (625,000 * 0.0083%) 51.875 AUD.
Converting the EUR to AUD, 1*1.2500 = AUD 12.5.
The net AUD amount is 12.5 – 51.875 = – 39.375, which is divided by the 500,000 position.
On a short EUR/AUD position, the rollover generates 0.00007875, or 7.875 pips.