Monday August 8, 2011 03:15
Swap Definition (SWAP): What Does It Mean?
Posted by Pro Trader as Intro to Forex
All transactions which consist in the market Forex, submit to conditions SPOT. According to these conditions, on all transactions which have been produced in the given trading day, realization of delivery of all sums is produced on the following. If you don’t want obey to such rules you should produce the transaction which is referred to SWAP. The given transaction allows closing and opening conditionally the transaction anew, as will allow settling all mutual relations of the parties.
For the client of the broker it will look as continuation of action of the rate next day. The given operation is produced exactly at 21:00 on GMT (that across Greenwich) and occurs in an automatic mode. In this case not settled there is only a resulting effect of that sum which participated in the transaction. It also is called as netting that means profit or a loss which was on your account after carrying out of operation SWAP. It is necessary to consider that SWAP is almost imperceptible on resulting effect of the transaction except influence on it so-called swap points.
Computation of SWAP points
In each country National and the central bank establishes discount rate of the currency. In each country there are the discount rates. Distinction between them happens rather big. If to follow for example of the USA and Japan discount rate at US dollar it is more than at Japanese yen in several times.
Here we notice a situation which is known to many. If you decide to place in bank the deposit in some national currency it can pay to you approximately 10 %. If you decide to make it too, but in US dollars to you will offer no more than 5 %, as all business is in a difference of discount rates.
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