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Swap is the amount of money you receive or pay to hold a position overnight. It is formed based on central banks’ interest rates of those countries whose currencies you trade. Swap can be positive or negative.
When buying the EURUSD pair, you borrow USD to buy EUR.
Let’s suppose the Federal Reserve interest rate is 1.5%, and the rate of the European central bank is 0.5%.
If you borrow $100 000 from the Central Bank of America to deposit €95 000 to your account in the Central Bank of Europe, then each time transferring positions through midnight you’ll pay 1.5% rate for your loan in the Central Bank of America and receive 0.5% interest on your deposit in the European Central Bank.
0.5% (you receive) – 1.5% (you pay) = -1%. This means that you will have to pay the fee to hold a position overnight.
If you borrowed currency with a lower interest rate than the currency you invested in, you would receive this fee on your account every night while you held a position.
However, not all traders can get or pay such a fee. That’s why FBS offers swap free option.
A swap is an interest paid for holding an overnight position based on central bank interest rates. Paying such interests conflicts with Islamic principles.
To make trading accessible for all, we offer an Islamic account (Swap Free) with no swap charges.
This service is for Muslim traders who are prohibited from receiving or paying interest according to the Islamic faith.
A weekly commission is applied for long-term positions only of Forex Exotic instruments. It is charged seven days after the initial rollover and every weekend until the position is closed. For other instruments, there is no weekly commission.
To activate the Swap Free option, contact our 24/7 support team.