"Take Risks: If you win, you will be happy; if you lose, you will be wise. Nothing ventured, nothing gained."

Monday, November 23, 2009

Aud/Usd - Swap Interest / Rollover Rate

Not too bad for a Swing Trade on Aud/Usd? with a 55 point trailing stop in place. on top of that, with the interest rate hike, who dares short the pair? Such a high rollover rates ain't it?

Fyi, the above trade was executed with 2 standard lot. dats why the rollover rate, and its gonna continue to increase for the next few days, provided the trade is still open. delicious? sadly, it was tested on a demo acct, so that i can show u the delicious taste of swap interest. IF ONLY I HAD USE LIVE !!! If only if only if only.. very typical slogan we use when trading..

Anyway, how does Swap works? it is the difference between the overnight interest between the two currencies. Difference? Yes, if u're in the position of the currency that has higher interest rate between the pair, u earn the swap.. and the amount is the difference between the two interest rate.

Take this example. If you have been reading the news past month, u would've know RBA (Reserve Bank of Australia) has hike their rate to 3.25%, and then to 3.5% currently. And as u can see, the Fed has been lying low on the USD rate that is close to zero, probably abt 0.25%. i can't go thru the exact mathematical calculation with u becuz i know u're not got read them.

im juz kidding, ok i admit i do not know the exact way to calculate it at the moment. i wish i know i would've share it here with u guys. therefore, based on above example, i longed Aud/Usd becuz im buying Aussie (and selling Dollar), thats why it earns me the interest in carrying overnight. on the other way round, if you were to have short this pair, needless to say, negative swap will be charged.

Different brokers have different rollover rates. And the rate changes daily. Hope this serves part of ur decision in trading. but i dont think u need to worry about this if ur an scalper or an intra-day trader cuz u would be unaffected.


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