Forex SWAP Calculator
In the world of forex trading, swap, also known as the “rollover” or “overnight interest,” signifies the net profit or loss a trader incurs when holding currency positions open overnight. Swap rates come into play when traders utilize their broker’s funds to enter a trade.
For instance, let’s consider a trader engaged in trading the EUR/USD currency pair. In this scenario, the trader is essentially borrowing USD from their broker to purchase EUR. Consequently, the trader must pay interest on the borrowed USD while earning profits from their EUR holdings.
Swap rates are fundamentally determined by the disparity in interest rates between the two currencies that make up the currency pair. If the forex swap rate is positive, it implies that the trader will accrue additional profits, but if it’s negative, the trader will incur additional losses.
Here’s How You Can Make Use Of Our Swap Calculator
- Choose the contract size.
- Input the interest rates for both the first and second currencies in the pair.
- Specify the broker’s mark-up.
- Enter the current price or exchange rate.
- Select the number of days in a year (typically 365, but some brokers may use 360).
- Click the calculate button.
Now, Let’s Delve Into The Formula For Calculating Swap Rates
Swap rate = (Contract size x [Interest rate differential + Broker’s mark-up] / 100) x (Price / Number of days per year)
Here’s a breakdown of the components:
● Contract size: The size of the trading contract in units.
● Interest rate differential: The difference between interest rates of the currencies in the pair (e.g., for EUR/USD, compare the FED rate with the EU central bank rate).
● Broker’s mark-up: The interest earned by the broker for lending money to the trader.
● Price: The current exchange rate.
● Number of days per year: Typically 365 days, but may vary depending on the broker.
Let’s Illustrate This With A Calculation Example
● Currency pair: EUR/USD
● Contract size: 100,000 units
● Interest rate differential: 0.75% (3.25% – 2.5%)
● Broker’s mark-up: 2.5%
● Price: 1.25
● Number of days per year: 365
- Swap rate = (100,000 x [0.75 + 2.5] / 100) x (1.25 / 365)
- Swap rate = (100,000 x 3.25 / 100) x (1.25 / 365)
- Swap rate = (3,250) x (0.003424)
- Swap rate = 11.13
So, in this case, the calculated Swap rate is 11.13. This figure represents the net profit or loss associated with holding the EUR/USD position overnight.
BinckBank is a Dutch stock-brokerage. It offers an online trading platform to trade financial assets. The company was founded in 2000. The company was mostly dealing with the professional broker market and banks.
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