OctaFX Goes Swap-Free: Here’s How It Will Affect Traders
Global broker OctaFX recently announced that it has become swap-free in all countries where it operates. Now, traders do not have to pay this type of fee if they leave their orders open overnight. But why did they pay for it in the first place? Let’s explore swap fees and why brokers charge them.
Forex trading usually involves the use of leverage to open larger positions that could yield more profit. Since using leverage is a way of borrowing money from a broker, traders have to pay interest when their orders are open for more than one day. Swap is a way to load it.
Swap fees depend on the interest rate differential between currencies in a pair, called the swap rate. Swaps are calculated based on whether the order is short or long and are usually charged at midnight. On Wednesday night, traders must pay weekend swaps at triple the usual size. They mainly use an intraday strategy to avoid paying swaps, which significantly reduces their investment experience.
Swap fees can sometimes, but quite rarely, be paid to a trader. How? The answer lies in the swap rate, which can sometimes be positive, provided that the interest rate of a currency is negative.
The fee calculation formula is as follows:
Swap = (lots * long or short stitches * stitch size)
Let’s calculate the swap for one of the most popular currency pairs, EURUSD. If a trader opens a long EURUSD order of 10,000 units and closes it the next day, the swap would be:
(0.1 * –5.616 * 1) = –0.56USD
Charged daily, swap fees tend to add up over time and make trading less profitable. In order to increase investment opportunities for its clients, OctaFX decided to remove swaps. These fees will no longer prevent traders from using medium and long-term strategies in the financial market. They can now hold as many orders as they want for as long as they want and are not charged any swap fees.
OctaFX is a global broker that has been providing online trading services worldwide since 2011. The company is involved in a comprehensive network of charitable and humanitarian initiatives, including improving educational infrastructure, short-notice relief projects, support for local communities and small and medium-sized enterprises.
In Nigeria, he managed to win the “Best ECN Broker 2021” award by World Finance and the “Best Forex Broker Nigeria 2022” award by Global Banking And Finance Review.