If you have an open position at 5pm EST (Daylight Savings) every day, there will be settlement activity that will generate SWAPs. The interest includes the “spread” on the traded product.
Be aware that you may have to pay or be able to earn SWAPs, depending on the product being traded. If trading a currency pair, there is a difference in interest rates between a pair (i.e. two) currencies because there is an interest rate on the currencies themselves. If an investor buys the higher interest rate side of the two currencies, there is an opportunity to receive SWAPs. The reverse is also true, i.e., interest is paid. In addition, even if the market is closed on weekends and Sundays (including other holidays), the SWAP is still calculated. The forex market is T+2 settlement, so in forex trading, it is often the open positions on Wednesday that are calculated for these three days.
Although there are theoretical formulas for calculating SWAPs, the final interest rate will not be simple to calculate due to factors such as financing fees of different trading platforms, central bank policies, and short-term fluctuations in the money market. SWAP information is available directly on our PGM trading platform for your convenience.
When trading forex, you need to be aware of how SWAPs are calculated, as well as factors such as interest rate differentials on investment products and finance charges. SWAPs can have an impact on trading and are a cost factor to be aware of when trading forex.