Understanding Swaps

Hello everyone!

I have a general idea of what swaps are. They represent the difference in interest rates for one currency to another. You get a positive swap over night, if you are long in currency that has higher interest rates and negativ swaps if anything else, right? But then, how can both currencies have negative (or positive) swaps? You pay for long or short over night either way... Well that is probably because the probability that the currency will rise soon or interest rates might change soon? I don't knot, you might know better.

Then, I assumed swaps do not vary too much between different brokers. As I discovered, they do a lot. For example: The Long (short) swap on EURJPY with purple trading is -3.53 (-0.01) right now while it is 0.01 (-0.001) with swiss quote. It is not even the same factor between long and short. I know Brokers can make their own rules prices. But they are limited to arbitrage. I must add, the swaps from purple trading are taken from meta trader while the swaps from swiss quote are from their website though they state they are the current swaps.

Third, I am look for some historical data on swaps for my analysis. So if anyone know where to get them. This would be irrelevant, if the swaps really vary that much.

When you check swaps, look at the CBs interest rates and its difference, too. Years ago i did swap & rate interpair bank exposure trades in the G8. But instead of hedging the narrow or much wider deviations (the yield curve stays the same) and waiting weeks or months to cash in, the more faster and lucrative way is to go with the directional momentum moves.

Its easier to break down it on example. Lets take EURRUB pair which rate differential is currently near 10%. You borrow Euro and pay zero interest (actually not quite zero there is LIBOR and other costs), purchase and hold Ruble which has interest of 10%/year. Basically it explains why ruble is currently immune to oil fluctuations and continues to gain strength. Global banks hold stimulus for now and it favors carry traders, once risk sentiment changes there may be sizeable pullback, so watch out when trying to play with the fire.

Thanks for your replies so far.

I still don't understand these huge differences in swaps between different Brokers. How are they calculated? What do their rate depend on?`Is there something like a fair value or a guideline for swaps? I need some generalization about them: "if swap long rises, markets do this and that...". Hope you understand what I mean.

Some brokers are more greedy than others and want a piece of the cake. They will argue that's the cost of doing business with them.
It can also be an indication of how many clients are holding positions in a particular currency or fx-pair (then the broker mostly raises the swap to his favor).
If you still don't know what's going on, ask directly the broker why his swaps suck. lol


Nah, watch the CBs interest rates.
I did it for the G8 currencies and cross-checked the overall bank exposure costs icl. the fx prices in the interpairs.
There are very few close deviations and there are combinations when it's much wider.
It's very useful during the week and for intraday-trading to catch mostly uncorrelated momentum moves.

Yeah, I could check the interest rates. This would be a longterm approach. I want something different. My idea is: Because it is not always clear to say if a trend is down or up I want something that reveals supply and demand. If long swaps are better than short swaps, demand for that pair should rise, shouldn't it? Hence the trend should be up. To be clear, I don't want to enter long based on that, I just want to trade with the trend. However if higher swaps represent the risk of that pair, the interpretation becomes more difficult.
If swaps vary so much between brokers, it should be not problem to create an index or average value. And besides, I am not interested in the absolute value but rather in changes or differences in long / short respectively.

So does anyone know some website where to get historical data on swaps? Preferably different brokers (if the broker is the issue of fair representation).

There is no easy free lunch in swap trading because banks will pass these costs mostly to the fx prices!
There are better and more complicated methods to bet on swap-price fluctuations between multiple currencies.

I do not want to bet on swaps. I want to clean up the picture of a messy chart. So my idea is that changes in swaps show a trend that is not so obvious and maybe swing points.

Yes, i understand.

Finding a source that contains all historical swap changes from many trustworthy and honest brokers isn't easy.
Good luck with that. lol