what happens when you re charged for swap?
In forex, you're always trading a pair of currencies. Says to long 100,000 units (or 1 lot) of EUR/USD, you will sell USD to buy EUR. If you're holding the position overnight, you will have to settle the interest during the swap. Since you're holding EUR, you will earn the interest from it. But since you're short-selling USD on margin, you'll have to pay the interest for the money borrowed. At the end of the day, if you earn the interest from EUR more than you pay the interest for the borrowed USD, you will make a profit from swap.
Says if you're instead shorting selling EUR/USD, the swap interest will be negative, and you'll have to pay for it. The swap interest varies from one currency pair to another and also from one broker to another. Currently at Saxobank, a AUDUSD position will cost a negative swap regardless of long or short-selling. On the contrary, a USDNOK position will earn a positive swap whether it's a long or a short-selling position.
The calculation of swap interest varies slightly from broker to broker. SaxoBank uses a more complex equation for that, read this page. Oanda on the other hand computes the interest difference second-by-second, read this.
Is this happen in real life, I mean, when Im trading with real money, is that going to happen to me? Is better if you pay to another person for this?
Is this happen in real life, I mean, when Im trading with real money, is that going to happen to me?
Of course. This is part of the deal. It seems that you're very new to trading. Be prepared to pay more than the swap ...
FerruFx
I was reading and I came across here, you just said that you would have to pay more than just a swap, what else you are referring to. Could you explain please?
You are right FerruFx, I´m totally new, but I want to know what else do I have to pay when get in real life? Thanks a lot.
I was reading and I came across here, you just said that you would have to pay more than just a swap, what else you are referring to. Could you explain please?
You are right FerruFx, I´m totally new, but I want to know what else do I have to pay when get in real life? Thanks a lot.
It seems that you are totally new to trading. So what I meant is that you must be prepared to loose some of your funds (this is the deal to learn and take experience). Pay the swap is 1 very small thing in trading. So don't pay too much attention about the swap. Keep concentrate on your trading.
FerruFx
You'll obviously pay spreads. 2 or 3 pips look pretty small, BUT if your average net profit is 20 pips per trade, the spreads will reduce 10% to 15% of your profit. That is a lot, considering that in the game of Roulette, the house has only 5% edge. Spread is what make forex worse than most casino games.
You may think 20 pips average profit is an easy target for your system, but the best systems I've seen can barely hit that 20-pip target. Sure you can sometimes make a big 100 pips profit or 200 pips, but at the end of the month, after the losses are taken into account, the average PL per trade will likely fall below 20 pips.
Without proper strategies to combat this spread problem, an account with $10,000 deposit will blow up shortly before the 100th trade or, at best, 200th trade.
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I need to know and understand why sometimes I get charged for a transaction and if I´m making profit it ends up reduced and if I had a loss it becomes bigger.