To swap or not to swap in Forex, this is the question!

You are a a wannabe Forex trader or just starting your trading “career”, and one of the parameters your are considering is Swap.

There is a reason why I’m not including professional traders in here. They already know that based on your trading style, whether you will keep your orders open for long periods, or short ones, swap can have from no effect to a huge one on your earnings.

Well, you have a strategy, which might range from High Frequency Trading (HFT) where you make very short timed trades, to trades going on for months. I’m assuming here that you will have a balanced ratio between BUY and SELL (long & short) Forex trades, just for the purpose of objectively analyzing swap rates.

First we need a reliable source of swap rate, which I’ve found and used, and in this case none is better than MyFXBook. We can see that there are positive and negative values, with the negatives being ALWAYS bigger, in absolute value, than the positives.

Based on my analysis, if you make the difference for each broker between the Long and Short swap rates, you will end up being in the negative territory. What it means for you account is that you will end up always losing from overnight or positions going on for long periods.

If you make use of leverage, which sometime can go up to 1000 for some brokers, you will end up paying much more to the broker. This is just wasted earnings which brokers are taking away from you.

In the end of the day brokers are here to make money for themselves, not for you.

Take extra care into considering swap as an important element of you trading strategy, as it will hunt you for as long as you will be trading. Even if you see accounts ads with no swap, be very careful as they have commissions embedded, in which case you just have a negative on both sides of the trade.