Swap Definition (SWAP): What Does It Mean? Part 2
Difference between the discount rates: what is this?
It means here that. If you have produced the transaction on US dollar purchasing (USD) for Japanese yen (JPY) as a result you receive US dollar (USD) at which interest rate more than at yen which give in exchange. It is that term which is considered minimum for a bank loan. For this short enough term banks have time to add percent on that money which you use in the transaction.
It follows to that if you, having purchased US dollar (USD) leave the transaction next days the bank will already add an interest rate differential to your deposit. If you have produced the transaction on the contrary and have purchased Japanese yen for dollars already you should return to bank an interest rate differential.
Let’s admit, you have made the transaction on purchasing of certain currency. Such transaction or more truly a position is called as LONG. If you have on the contrary made the transaction on currency sale it is called as a “short” position, SHORT.
During calculations it is necessary not to forget about that since Wednesday on Thursday Friday and Monday are considered as date of operation SWAP. Therefore points swap should be increased for three days. If in the country from which there is this or that currency holidays points swap should be increased by certain quantity of days.
Such parameters as time of carrying out of operation SWAP TOM NEXT, and also beginning time / the work terminations on Monday and Friday are considered across Greenwich or GMT. It becomes because of that the time across Greenwich doesn’t produce seasonal adjustment, as allows it to be reference.
Working hours also can affect carrying out of the state and religious holidays. About non-working time intervals report not later than for 48 hours and there will be no possibility to perform operation on this or that currency.
If you want to participate in forex trading should start from learning the basics of this market to make sure you do not experience problems with this industry.