Spreads & Swaps

WHAT IS SWAP SPREAD?

The Importance of Swaps & Spreads in FX​

In forex trading, the definition of a spread is the difference between the bid and the ask price of a currency pair. In other words, it is the difference between the price you must pay for a currency pair and the price you can sell it at. Spreads are how non-commission forex brokers make money.

WHAT IS A SWAP IN FOREX?​

The interest that you either earn or pay for a trade that you keep open overnight

When you trade forex, you are basically buying or selling a currency for another, with a view to ‘swap’ it back later with the broker. This is where the idea of swaps come from, as they are the fees you incur for holding your position overnight. If you choose to keep a trade open overnight, you will either be paid or be charged interest on your position. The very definition of a swap is the difference between the different interest rates in a currency pair.

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