EVERYTHING ABOUT FOREX
The word "swap" means an act of exchanging one thing for another. At the financial markets swap is an agreement between two parties to exchange sequences of cash flows for a set period of time.
Swap is calculated depending on the currency rate position and based on low or high interest rates.
If a currency with a high interest rate is sold against a currency with a low interest rate an investor agrees to pay a commission for holding positions open overnight. This reflects as Swap on a trader’s account.
Example: If an investor sells TRY and buys USD, the swap will appear on a trading account as a negative balance.
Swap sometimes referred to as "overnight interest cost" or "cost of carry".
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