How to earn Swap Points with High Interest Rate Currency on Tickmill MT4 Table of Contents
- Tickmill now offers Optimal Swap Points
- What is Swap Point?
- When Swap Points are credited?
- Merits and Demerits of Swap Points
- Recommended Forex Currency Pairs for Swap Points
Tickmill now offers Optimal Swap Points
There are two typical profits of FX which are “gain on trading” called “capital gain” and “swap point” on income gain.
It is common and easy to imagine the gain on sale as the profit gained by buying when it is cheap and selling it when it is high.
However, “swap point” is a word that may not be familiar to those who are new to FX.
In the first place, there may be some who do not know what a swap point represents and what kind of benefits it has.
Tickmill has recently updated the Swap Points to offer even better rate for all traders across Forex currency pairs.
In this article, we will introduce what swap points are in FX trading and what advantages and disadvantages they have.
Finally, we also introduce recommended currency pairs to aim for high swap.
You already know what Swap Point is? Then go to Tickmill Official Website to see the latest swap points to start planning your trading.
What is Swap Point?
What is a swap point in the first place?
In FX trading, swap points mean “profit and loss resulting from interest rate difference between high interest rate currency and low interest rate currency“.
Basically, the swap points earned per day are determined as follows.
In case of buy position:
“Interest rate of bought currency – Interest rate of sold currency”
For instance, when buying TRYUSD, “Turkish lira” is the buying currency and “US dollar” is the selling currency.
If the Turkish lira interest rate is 24% and the USD is 0.01%, the swap points are:
24% – 0.1% = 23.9%
In case of sell position:
“Interest rate of sold currency – interest rate of bought currency”
For instance, when selling TRYUSD, “Turkish lira” is the selling currency and “US dollar” is the buying currency.
So the swap point is:
0.1% – 24% = -23.9%
Therefore, if you buy a currency with a high interest rate, you can receive swap points according to the difference in interest rates.
Conversely, if you sell a currency with a high interest rate, you need to pay swap points according to the interest rate difference.
Swap points tend to attract attention when you buy high interest rate currencies, but be careful as some transactions require payment.
On Tickmill MT4, the swap point works the same way as the examples above.
When Swap Points are credited?
When are swap points credited? Swaps occur when you hold positions across days.
Forex brokers carry out a process called rollover during the transaction break time when the date is changed, and a swap is given during this process.
This rollover time is set around the closing time of the New York market, and there are slight differences for each Forex company.
However, FX trading cannot be done on Saturdays and Sundays.
The swap points given on Saturdays, Sundays and holidays are collectively given on the days specified by each Forex broker.
Merits and Demerits of Swap Points
Swap points are attractive for continuous profit, but of course there are disadvantages.
Let’s consider both the merits and demerits of swap points and think about how to minimize the risk.
First of all, there are two merits and demerits of swap points.
1. Swap Points Merit – Continuous Profit
The advantage of swap points is that you can continue to receive profits.
For example, if you try to aim for “gain on sell” in stock trading or FX trading, you can receive the profit basically only once at the time of sell.
However, you can get swap points every day except the weekends and holidays as long as you hold the position.
The swap points you can get per day are not so large, but if you accumulate it with dust, it will be a mountain.
For example, let’s say that when you trade TRY/USD, the swap points you can get per day are “10 USD/100,000 currency”.
And if you continue to hold a position for 100,000 currencies for one year, it will be “10 USD x 365 days = 3,650 USD”.
If it is 1,000,000 currency, it will be 36,500 USD.
2. Swap Points Merit – Large Swap Points with Leverage
In addition, FX has a system called “leverage” that allows you to trade more than your own funds.
With this leverage, you can trade up to 500 times your own money with Tickmill.
In other words, it is possible to have a position with a small investment fund.
Also, since swap points increase according to the amount of currency traded, the larger the leverage, the more swap points you can get.
Even if the profit is about 10 USD per 100,000 currency, there is a possibility that it will be a big profit if leverage is used.
However, because leverage can move a large amount of money, it also carries risks.
Therefore, do not over-leverage at first, and try to decide your leverage by considering your own funding.
Don’t let your immediate profits dazzle you and leverage 500 times from the beginning.
3. Swap Points Demerit – Exchange rate fluctuation risk
In FX trading, the exchange rate basically fluctuates for 24 hours.
Therefore, while holding the currency for a long time, the unrealized loss may be larger than the profit from the swap point.
In addition, high interest rate currencies are often “emerging country” currencies, and are characterized by rapid fluctuations in exchange rates.
So be aware of these risks when you hold a high interest rate currency for a long time.
If the exchange rate fluctuates, the swap points received will also fluctuate.
4. Swap Points Demerit – Interest rate fluctuation risk
Next is interest rate fluctuation risk.
If the policy interest rate of the country that issues the target currency changes, the interest rate difference may become smaller or may reverse.
In particular, if the exchange rate fluctuates significantly due to the financial crisis and the policy interest rate is also lowered, the interest rate difference may be reversed.
If that happens, “payment of swap points” will be required.
The risk of fluctuations in interest rates is one of the disadvantages.
Even if the policy interest rate does not change, the swap point will change due to factors such as exchange rate fluctuations.
Therefore, it is good to have a habit to regularly check the amount of swap points on the websites of Forex brokers.
Recommended Forex Currency Pairs for Swap Points
Let us introduce the recommended currency pairs to aim for swap points, and their advantages and disadvantages.
First of all, there are emerging countries’ currencies, which have one of the highest interest rates of all currencies.
The major emerging market currencies that are attracting attention in swaps are the Turkish lira, the Mexican peso, and the South African rand.
The three currencies from developing countries are attractive for high swaps, but compared to developed countries, there is a greater risk of price fluctuations, and there is a risk that prices will fall sharply.
Therefore, let’s fully understand that it is “high risk, high return”.
If you are distracted by emerging countries’ currencies, it is recommended that you aim for a knack for swap points in developed countries’ currencies.
- TRY – Turkish lira
- The Turkish lira has a very high interest rate of around 25%, making it a highly profitable currency for swaps. However, please note that the Turkish lira is a currency with a small trading volume and a sharp price movement.
- MXN – Mexican peso
- “Mexican peso” has been attracting attention in recent years. Although the Mexican peso does not have a high interest rate as much as the Turkish lira, the fluctuation range of the exchange rate is 5 to 8 cents and the exchange rate fluctuation risk is relatively suppressed. The policy interest rate is around 10%, and you can expect sufficient profit from swaps.
- ZAR – South African Rand
- South African Rand also has a fairly high interest rate of around 7%, so you can aim for a profit with swap point. And South Africa is an emerging country and one of the world’s most resource-rich countries. Therefore, resource prices and exchange prices are often linked.
- AUD – Australian Dollar
- Australia’s currency is both a developed country and a resource country. Australia is growing year by year, and the Australian dollar is a stable currency. In addition, the Australian dollar interest rate is 1.0%, and although it is by no means large, we can aim for a continuously stable swap.
- USD – US Dollar
- The most popular foreign currency is the US dollar. The US dollar is said to be the center of the world’s currencies and has the largest amount of currency trading. Therefore, it is a very stable currency. Also, the US policy interest rate is 2.5%, making it a very balanced currency that can firmly target swaps.
For all new traders, Tickmill is giving away 30 USD for free as a No Deposit Bonus.
You haven’t opened an account with Tickmill yet?
Open a live trading account to get Tickmill’s $30 No Deposit Bonus today.