For those of you who do not already know there is a way to can earn money from your trade regardless of what direction your trade goes. This is what is called negative or positive swap. For those who do not understand what swap is and would like to learn more you may read this wiki link
When you open a trade using your Forex brokerage account there is always a decision on to buy or sell. For a long time I did not even think about what swap rates could do for me but now I am glad I am looking into it. If you hold your trades for at least 1 day at a time swaps can prove to be very important part of your trading as well.
While I do not recommend building a system on swaps alone (even though some people have done it), what I am trying to discuss here is the power of adding this factor into your decision making when trading.
Take for example if you are a trader with an average trade amount of 1 trade per day, and you hold your trades for an average of 1 day. Simple enough.
In one year you would have a total trade amount of around 240 trades held for an average of 1 day per trade. Now let's see what swap could have done for you.
If you have a 10,000 dollar account and your average trade size is 1 lot per trade in all of these trades, and you ONLY looked for positive swap trades, meaning that each time you placed a trade you made sure to only take the positive side of the swap. Let's say your average swap paid to you per trade was $10.
After 240 trades you would have made about $2400 on swap alone. Your commissions likely would be around $1000. So your left with about $1400.
Let's round that figure down to $1000, maybe your commissions are higher.
That's 10% per year return from your swaps alone. It would seem to me that it is highly advantageous for traders to consciously look to trade only with the swap and not against it, as this can work both ways. For most traders who do not look at swap at all, this number will usually even itself out and you will end with about break even on your swaps for the year.
Let's also remember that the example I gave above was if you were only holding trades for an average of 1 day. Imagine holding for an average of 1 week, but still using the same amount of trades, what would your total payout be?
I understand it is hard to hold positions for a long time as the market can be unpredictable, but It's just a thought for new traders who may not understand the power that this knowledge can give you.
Of course, if you do decide to trade against the swap, surely this trade must be worth it right? If not you should close it before the market does and starts charging you for it.
I know I did not go into all the details here, and I am happy to answer any questions you may have.
Exotic pairs are also very interesting, some paying very high swap rates. Take EURTRY for example, that pair pays a swap rate of about 24 cents per day per 0.01 lots. Holding that pair for 240 days would get you $57.60. On a 100$ account that is a very nice return, assuming the swap rates don't change and your actually in a good trade which makes your profit as well or at least gets you break even.
When you open a trade using your Forex brokerage account there is always a decision on to buy or sell. For a long time I did not even think about what swap rates could do for me but now I am glad I am looking into it. If you hold your trades for at least 1 day at a time swaps can prove to be very important part of your trading as well.
While I do not recommend building a system on swaps alone (even though some people have done it), what I am trying to discuss here is the power of adding this factor into your decision making when trading.
Take for example if you are a trader with an average trade amount of 1 trade per day, and you hold your trades for an average of 1 day. Simple enough.
In one year you would have a total trade amount of around 240 trades held for an average of 1 day per trade. Now let's see what swap could have done for you.
If you have a 10,000 dollar account and your average trade size is 1 lot per trade in all of these trades, and you ONLY looked for positive swap trades, meaning that each time you placed a trade you made sure to only take the positive side of the swap. Let's say your average swap paid to you per trade was $10.
After 240 trades you would have made about $2400 on swap alone. Your commissions likely would be around $1000. So your left with about $1400.
Let's round that figure down to $1000, maybe your commissions are higher.
That's 10% per year return from your swaps alone. It would seem to me that it is highly advantageous for traders to consciously look to trade only with the swap and not against it, as this can work both ways. For most traders who do not look at swap at all, this number will usually even itself out and you will end with about break even on your swaps for the year.
Let's also remember that the example I gave above was if you were only holding trades for an average of 1 day. Imagine holding for an average of 1 week, but still using the same amount of trades, what would your total payout be?
I understand it is hard to hold positions for a long time as the market can be unpredictable, but It's just a thought for new traders who may not understand the power that this knowledge can give you.
Of course, if you do decide to trade against the swap, surely this trade must be worth it right? If not you should close it before the market does and starts charging you for it.
I know I did not go into all the details here, and I am happy to answer any questions you may have.
Exotic pairs are also very interesting, some paying very high swap rates. Take EURTRY for example, that pair pays a swap rate of about 24 cents per day per 0.01 lots. Holding that pair for 240 days would get you $57.60. On a 100$ account that is a very nice return, assuming the swap rates don't change and your actually in a good trade which makes your profit as well or at least gets you break even.
