Do Swaps Make Sense?

May 8th, 2012

The easiest definition of swap term is assets retained or added to a trading account for prolongation (carry over) of a position to the next day or a fee for carrying a position over midnight.

moneySwaps can be either positive or negative. Interest for a position carry over in a currency market is paid or deducted for every open trade at 17.00 EST (Eastern Standard Time) for every trading day. Trades opened before 17.00 EST and retained after this time are considered as carried over till next day and are charged or credited with an interest depending on a trading position opened by trader.

The currency of one country bought/sold by trader versus the one of another determines if it is going to be positive or negative swap. The swap rates are set by currency rates composing a currency pair. In case the loan rate exceeds the deposit one, the swap is written off from a trading account. Positive swap is credited when the active rate of bought currency is higher than the one of sold currency.

The target of Forex traders is to derive profit running speculative operations with currency contracts. Practically, a currency delivery does not take place. Working through a brokerage company, trader may apply to leverage and hold positions open for as long as he wants. In case a factual currency delivery is expected, it should have been accomplished within 2 days.

In most cases a position carrying over to the next day is implemented automatically by broker. It is required for prolongation of a current open position and avoiding a real accrual of purchased currency to a trading account. Swap combines with buying or selling of two contracts with different settlement dates on equal terms. If a position remains open by the end of the day, it will be closed and opened immediately, but with a small gap. During trade execution a currency purchased by trader is conditionally deposited into bank at interest, and the sold currency is taken as a loan at interest rate as well. For instance, you open a trade with USD/JPY pair, buying dollars for yens. In case at that time the interest rate in the USA is higher (for example, at 1%) than in Japan (0.3%), then you will have the difference between them (0.7%) accrued. If you would sell dollars buying yens, then you would have to pay the difference between the rates.

From Wednesday to Thursday a triple swap is added or deducted. Why? As trade calculations and currency delivery would have been completed on the second day (in our case it is Saturday), when world banks are closed, the settlement date shifts to Monday and the swap is calculated for 3 days.

Positive swaps allow trader to raise additional profit. Currencies with huge interest rate difference are actively applied in carry trade operations for gaining only due to rate fluctuations and swaps.

Some brokers provide their customers with swap-free accounts, if standard trading terms run counter to their religious convictions. On swap-free accounts (also called Islamic) any currency pair trades can be executed, but if they are carried over midnight, trader gets no profit or loss.

Added by Andrey Misyuk,
InstaForex Clients’ relationship manager

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Forex Rebate

April 30th, 2012

rebateWhile making deals on Forex a trader pays the spread to a brokerage firm. A spread is the difference between the bid and ask price of an asset. There are several types of spread: fixed spread, fixed spread with extension, floating spread. For different currency pairs there are often different types of spread that can vary depending on the market situation.

Spread is the main source of broker’s income. In fact, a spread is a fee charged for carrying out a transaction. But you can easily regain the part of the spread by using various rebate-services.

Rebate service offers consumers cash back on the purchase price of a good or service. Having performed the settlements, a seller offers a certain discount to the customer. This service is widely used not only on Forex but also in marketing in order to promote sales.

On currency market rebate-projects enable traders to receive a refund from each executed deal. As a rule brokerage firms provide that kind of services not directly but via special services targeting at paying off a spread (but not always). If you want to use this service, you need to register your trading account in the rebate system or open a new brokerage account with the help of a referral link on the rebate-services website.

The interaction between a trader, broker and a rebate service can be described as follows: a broker pays to the company providing rebate services, a fee for acquiring a new client. Rebate service gives the part of this fee to a trader. Thus, we can say that the spread is divided into three parts of certain proportions.

The rebate services are provided for free. Trading conditions and the size of a commission fee remain unchanged. You will simply be partially refunded – monthly or weekly regardless of whether you trades were profitable or not.

The registration in rebate projects is quite simple and does not take much time. The only thing you need is to find an appropriate service and choose a broker, then open a trading account and begin to take a profit for each deal.

The size of a rebate commission depends on the amount of trades and the size of commission fee set by the broker and the service.

Such operations allow traders to reduce losses and get additional profit while making deals on Forex. Whatever your professional experience is, you will be able to use rebate-service and make your trading strategy more effective.

InstaForex cooperates with a number of projects aiming at returning part of the spread – for example, InstaRebate. The participants of the project receive 1.5 pips rebate for each deal, the highest refund rate on the brokerage services market. The rebate payments are accrued automatically on a trading account and the only thing a trader needs is to register in InstaRebate program.

Added by Tatyana Makhina,
InstaForex Clients’ relationship manager

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InstaFx Education Centre workshop in the Purwokerto city

April 24th, 2012

On Sunday, April 8, InstaFx Education Centre started a forex workshop with the topic “Memulai Berinvestasi dan Trading Forex dengan Aman dan Benar”. The event took place at the Wisata Hotel, Jl.Merdeka No.5 Purwokerto.
The workshop, which lasted for two days, was attended by 24 participants from the Purwokerto city and surrounding areas. The lectures were given by Mr. Abiyanto Kurniawan, a team teacher of InstaFx Education Centre, and Mr. Heni Pranyto, an associate tutor of InstaFx Education Centre. Teachers and students discussed such topics as forex basics, MetaTrader, forex analysis, trading system, risk management, and Sample Trading Systems.

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At the beginning of the seminar InstaFx Education Centre presented its profile, products and facilities of the workshop. All workshop participants were automatically registered with the InstaFx Education Centre. The education centre services became very popular among the visitors. It is proved by the questions asked at the event and hopes for further workshops expressed to the representatives. The level of knowledge among the participants varied, but there were many beginners.

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Lectures were arranged with respect to the students’ prior knowledge of Forex market, so hopefully after the workshop the students can “take the appropriate action” on Forex. The information was eagerly awaited by the visitors who were familiar with “Forex Trading System” and “Live Trading with the Teacher of InstaFx Education Centre”. The lecture on the Trading system was listened with the great attention.

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At the end of the workshop InstaFx Education Centre awarded 8 attendants with the InstaForex shirts. The idea of the workshop was supported by the visitors as it provides a proper perspective and understanding of forex trading being safe and profitable. The students also hoped to arrange the forex trading community in Purwokerto city to share their knowledge and thoughts on forex trading after the workshop by the InstaFx Education Centre.

Added by Yana Krupko,
InstaForex PR-manager

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