The amount of interest paid or received by the trader for holding the position overnight. If the interest rate on the currency bought is higher than the interest rate on the currency sold, the trader will receive a positive swap point. Conversely, if the interest rate on the currency sold is higher than on the currency bought, the trader will pay a negative swap point.
Swap points can have a significant impact on the profitability of a trade, especially for longer-term positions. Therefore, traders should always consider the swap points when entering into a swap transaction, as they can affect the overall cost or profit of the trade. For example, a popular strategy is selling Yen and buying another high-interest-rate currency to earn a positive swap point.
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