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Swap

In trading, a swap refers to the cost or profit associated with holding a position open overnight. Also known as a rollover fee, a swap is the difference between the interest rates of the currencies involved in the trade.


When a trader holds a position open overnight, they are essentially borrowing one currency and lending another. The swap is the cost or profit associated with this borrowing and lending activity. If the interest rate of the currency being borrowed is higher than the interest rate of the currency being lent, the trader will pay a swap fee. Conversely, if the interest rate of the currency being lent is higher than the interest rate of the currency being borrowed, the trader will earn a swap profit.


Swaps are typically charged or paid on a daily basis and can accumulate over time if the position is held open for an extended period. Swap fees can vary depending on the broker, the currency pair, and the size of the position.

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