What Is A Swap?
Swap is a term you will encounter during your trading journey. Swap is simply the overnight interest rate of your open trade that is paid, or deducted by your broker.
Whenever you maintain a trading position over to the next trading day, you will incur swap. Whether you receive a positive or negative swap, depends on the trade direction and swap rate of the pair at that point of time.
If we were trading the EURCAD long, we would be buying Euros and selling the Canadian Dollar. We earn interest on long positions and pay interest on short positions when we trade using margin. The difference is named 'carry' with positive carry occurring when we receive more interest than we are required to pay. Negative carry will be deducted from the balance on your trading account. Deductions will only be made for trades that are held overnight or, in other words, rollover to the next day.
Before you start getting worried about swap, here are two things to take note of,