In this post we would like to share five advices which will allow you to significantly improve the way to trade the Forex market through the Netswap system.
Interest rates
Since the interest rates play a big role in the determination of the Swap values, you should always be aware of any change made by central banks toward the rates associated to the currencies you are going to trade. The central bank’s board meet every month, every 6 weeks or every quarter (depending on the country of the central bank involved) and you can stay up to date on interest rate decisions by checking an economic calendar such as the one of Investing.com or Forexfactory.com.
Trades opening time
As the spreads are a relevant factor for the ROI, you should always aim to place a Netswap trade when the spreads of the brokers are the lowest possible. It is recommended to open the orders in the hours preceding and following the New York opening hour (8am EST or 1pm GMT) and never in the period following the New York closing hour.
You also shouldn’t open positions right before or after an important economic data release. That is because brokers typically lower the liquidity at that point in time and the spreads inevitably become wider. The biggest market-moving pieces of data come from U.S. and are the unemployment rate, the nonfarm payrolls and the interest rates (FOMC rate decisions).
Brokers subscription and payment methods
It may happen that after trading a profitable combination for quite a while, this stops working due to changes in the Swap values of one or more brokers or for a different reason.
By opening an account with multiple brokers before this occurs, you can quickly turn to another profitable combination without losing the time needed for the trading firms to approve your account. Moreover, subscribing to several brokers also allow you to trade multiple profitable combinations at the same time.
When doing this, it is also advised to get access to multiple payment methods as brokers may offer different deposit/withdrawal options.
Brokers leverage
Forex brokers like to disclose the leverage they offer to their customers, however that amount is usually referred to the Major pairs and it may be lower for Minor and Exotic pairs. Since leverage is needed to calculate the trade size of a Netswap trade, it is recommended to double check it, either by asking to the broker or by opening a trade with the pair concerned (the second way is safer).
Brokers commission
There are a lot of brokers nowadays who provide a trading account with lower spreads and a commission to pay at the time of opening and closing the trade. Some of them charge the commission based on a given amount of lots of the pair traded while others on a given amount of dollars traded.
You should never trade those pairs with Exotic currencies as the Base currency through an account with commission based on the amount of lots traded, as you will pay a lot more money compared to the one with commission based on dollar volume or with higher spreads and no commission at all.
For example, let’s say that you want to trade 100,000 USD worth of ZARJPY. Let’s also say that the USDZAR rate is 12.57 and the commission of broker 1 and 2 is respectively 4 USD per 100,000 USD traded and 4 USD per lot traded.
The commission charged by broker 1 is 4 USD.
The commission charged by broker 2 on the other hand is:
100,000 * 12.57 = 1,257,000 ZAR
1,257,000 ÷ 100,000 = 12.57 Lots
12.57 * 4 = 50.28 USD
Leave a Reply