Trading fees are one of the main concerns that are often overlooked by many traders when choosing a trade. With each trade, you will have to pay a fee that includes commissions, commissions and sometimes swaps. Swap fees are a rather special type of spending, and traders can take advantage of it to make even more profits. So what exactly is SWAP on MT4? How to view swaps on MT4? And strategies to use swaps to increase profits.
What Is Swap on MT4?
The swap, also known as overnight commission, is part of the cost that investors have to pay to the forex broker if they want to hold a position overnight.
When we trade forex, we will buy and sell currency pairs, and each currency will have a different interest rate. There will be an interest rate differential when holding a currency pair overnight. Investors will receive a rollover fee if the buy rate is higher than the sell rate. Conversely, if the buying currency pair is lower than the selling currency pair, you need to pay an overnight fee. This fee varies from exchange to exchange.
How to Check Swap on MT4
After downloading MT4 on your computer, you just need to follow the instructions below to check the nightly rate.
- Step 1: Go to the MT4 forex trading software, right-click on Market Watch in the left corner of the screen and then select the corresponding currency pair that investors want to check the swap fee, select the Specify article.
- Step 2: The system will display a table that includes the parameters Swap long (buy commission) and swap short (sale commission).
Swap recharge time
The calculation time of the standard swap fee will fall between 22:00 and 24:00. In addition, depending on each plan, there will be separate time intervals. Investors can find this information by reading the exchange’s regulations or asking the support staff.
For example, the exchange time is 22 hours. If you open a location at 21:49, you will be charged for the overnight stay. But the opening at 22:01 will not be set overnight. When trading, you also need to find out the overnight commission of the exchange to properly align the order!
How to calculate the Swap
Swap fees are charged at the close of the US session. Depending on each trade and leverage, there will be different levels of swaps. You can check this overnight rate on the exchange’s website.
In addition, you can also test on MT4 right away. You will then apply this fee to calculate the overnight swap as follows:
Swap = (Exchange rate/one point) x Volume (lot) x swap value in points
If the result of the swap is positive, you will benefit from this swap, if the result is negative, your account will be deducted.
When trading the EUR/USD currency pair, the swap for short positions is 0.01 and long positions are -0.45. If a trader makes a sale of a standard lot of the pair on Thursday and keeps the position open overnight, on Friday, the swap will be calculated as follows:
Swap = 100,000 x (0.01 x 0.0001 pips) = 0.10 USD.
With this short position, you will receive a profit of 0.1 USD.
In the event that an investor buys a standard lot of EUR/USD on Thursday and closes his position on Tuesday, the cost of the swap is calculated as follows:
Swap = 100,000 x (-0.45 x 0.0001 pips) = – 4.5 USD per night.
According to the above data, we will lose 4.5 USD per night and currently the position is held for three nights, so we have to pay a total profit of -4.5 x 3 = – 13.5 USD.
Assuming the same position is closed next Thursday, 1 week will have 7 days, 5 weekdays and two weekends. The interest to be paid is 7 x -4.5= – 31.5 USD.
As a general rule of the Weekend Swap, fees will always be charged for any position opened on Wednesdays. Therefore. For purchase orders from Thursday to Tuesday of next week, no weekend fees will be charged, so only 3 nights will be charged. But when you keep the night on Wednesdays, you will be charged the weekend tax. The fee will then be charged for 7 days.
How to take advantage of swaps in Forex trading
If you are a trader who loves scalping, you may not have to worry about swap fees. However, if you are looking for a long-term investment, you should know this fee. In order to take advantage of this fee in investment transactions, you should pay attention to the following points:
- Choose to trade currency pairs with positive swaps
Investors should check the swap rates of currency pairs before making trades. Priority should be given to choosing pairs with swap fees to benefit from overnight trading.
- Take advantage of the x3 swap on Wednesdays.
On the fourth day, the Swap will multiply by 3, so you can earn a decent amount. It would be helpful if you took advantage of this factor to conduct operations. In addition, you also need to pay attention to letting the stop loss stretch a bit to avoid being scanned because this is the time to start opening, then the spread will widen.