For every forex trade, you are essentially selling a currency to buy the other currency. You receive interest daily on the currency you purchased, while paying interest for the currency you sell. This interest rate differential is defined as “Swap Points”. Strategies which seek to exploit this interest rate differential are known as “Carry Trades”.
Mike decides to enter into a Short Position for EUR/USD. When one enters into a short position for EUR/USD, one is Selling Euro and Buying USD.
Vice Versa, a Long Position for EUR/USD is defined as taking a Buy Position for Euro and a sell position for USD.
As the interest rates for the Euro is lower than that the USD, one will be able to yield an interest rate differential from the Swap Points by holding on to the trade overnight assuming that there are no major fluctuations between the 2 interest rates of the given Forex pair.
By holding the FX CFD pair denoted “Blue” from the FX heat map will allow you to earn daily interest as long as the given FX CFD pair is held overnight in the correct buy/sell direction.
Traders need to be aware of the Exchange Rate Fluctuations for the currency pairs they are holding.
Examples shown are for illustrative purposes and may not reflect the current interest rate of the respective currencies.
* For more information on the FX CFD trading hours, kindly refer to our FX CFD Product page.