Before knowing the prevention, what do you know about swap forex?
Don’t skip this….
A swap(rollover) is a fee that is charged when you hold a position overnight. A forex swap is the interest rate between two currencies on which you are trading. It is calculated on your long and short positions.
A forex swap may be positive or negative. In a positive swap, you will get some money, on the other hand, in the negative swap, some money will deduct from your account.
Now the question is How to avoid swap forex?
Here is the short answer.
Basically, three main ways will be helpful to get profit by avoiding swap. First trade in direction of positive interest, second intraday trading, and third swap-free Islamic accounts.
Follow these steps to avoid swap and become a successful trader in this world-famous market. It is essential to know the interest rate of both currencies which you chose for trading.
Let’s discuss in detail avoiding ways of swap forex!
Can You Avoid Swap Forex
A forex swap is an agreement between two foreign parties that consists of swapping principal and interest payments on a loan. Many traders have to face swap forex.
But here is a question…
Can you keep away yourself from forex swap?
The short answer is yes, you can avoid it by following certain rules. Many traders lose money because of swapping that is the last thing they have to deal with.
Usually, in forex trading, it happens at the end of the trading day when you have to pay the difference.
Luckily, we have the solution to avoid this.
To prevent it, all trade should be closed at a certain time, before the end of the day. When you close it, you will not get any interest but won’t have to pay any money.
Always try to trade in positive interest. It is not as easy as said especially for the new traders. If you are new in this process and you are not sure about the beneficial trading.
3 Easy Ways to Avoid Swap Forex
The most asking query is that How do you avoid swap forex? Experts discussed many ways but three of them are easy and do work effectively. This is actually the way by which forex brokers make money.
If you want to trade with forex swap you should have to adopt the ways mentioned below. Let’s discuss them:
1. Trade-in Positive Interest Direction
It is the most effective way that will help you to trade successfully with the swap. At first, you have to trade in the direction of the currency that will allow a positive swap. Generally, this way is not recommended.
Normally, traders can do so when trading has the most favorable direction in terms of back and forward testing results of trading. So, if you are to make a lot of money in the forex market with the swap, you have to trade in a way where you find positive interest.
2. Trade Only Afternoon and Close Positions By 5:00 pm
Another way of avoiding swap is trading time and position. You may do it because you can remain in or out before time will roll over. However, there is less possibility for you to become an intraday trader due to swap forex.
You can become such a trader only because of your strategy and performance. Their results depend upon intraday trading.
In this market, you can hold your trading position for a long time as far from a few minutes to a few years. It depends upon the goal you have. A trader can hold a position based on the primary economical trends of one country to another.
So, if you want to prevent swapping you should close your trade in the afternoon and close your all positions right at 5:00 pm.
3. Open A Swap Free Islamic Account Offered by Some Brokers
Another option to avoid swap forex is swap-free accounts. These accounts are planned for the traders who want a trading system without any interest or for those who are not allowed to get swaps because of their religion.
This is offered basically for Muslim customers but in reality, many non-muslims also join it because of its benefits. They do so only if a broker offers them to choose it. These are swap-free Islamic accounts.
Such accounts work on Islamic beliefs and the schemes of no interest paid on business transactions.
So, to get more profitable trading, join a swap-free Islamic account and get overnight transactions without any interest.
What Is Positive Swap in Forex
What do you know about a positive swap?
Let me tell you!
Precisely, it is a type of swap trading in which you buy a currency with a high rate of interest and sell the other currency at a low interest rate.
In this way, you charged a positive swap. Your broker will add some money to your account in the case of a positive swap.
If you have long positions on the currency of high-interest rate vs low-interest currency, you can receive a fee on trading you hold each day.
In a positive swap, your trading account will be increased.
For example, in an overnight position, you may have to pay interest on selling Euros and get interested in purchasing Dollars.
What Is Negative Swap in Forex
In a negative swap, you will lose money having an overnight position.
This happens when you hold short positions overnight and the currency has a high rate of interest in the case of low-interest currency. That’s why you have to pay a fee for it.
You get a negative swap if the interest on purchased currency is less than the interest of sold currency. Hence, your trading account is charged with a swap fee.
While holding a position overnight, you will get interested in taking Euro and paid for selling the Dollars. So, the U.S dollar has a high-interest rate than Euros.
In such conditions, we shall have to face a negative swap. This value of the swap will be removed from your account when you finish the trade.
Frequently Asked Questions (FAQs)
What is a swap in forex?
Swap is a kind of interest fee that is paid to you at the end of each trading. You can receive interest on long positions and pay it on short positions when trading will on margin.
How do you stop forex swap?
You can stop it by trading in the direction of positive interest. It can be possible only if you trade in the daytime by joining Islamic accounts.
What are swap points?
They are the difference in interest rates between transaction currencies. For example, if you buy a currency of high interest and roll it over the next trading day, you will get swap points.
There are many brokers out there which provide swape-free accounts to trade. ICMarkets has this feature you can take advantage of with a very low spread.
Here is the end of our discussion on How to avoid swap forex.
Many new traders may indeed face forex swapping that is the main reason for their failure in this market.
Though they can’t avoid completely swap forex they have some easy ways to make a profit by swap.
According to my opinion, the main secret of preventing yourself from the swap is to make swap-free accounts.
But you have your own choice. What would you select, you must be careful and research before trading overnight.