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ROLLING SWAP FOR MARGIN TRADING CRYPTOCURRENCIES

10/25/2018
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What is SWAP?

First of all, let’s figure out what SWAP actually is. Where did it come from and where is it used?

SWAP has numerous different meanings in the world of finances: bank swaps, interest rate swaps, currency swaps, credit swaps, commodity swaps, equity swaps, etc. Here and now we will only cover the SWAP that has to deal with margin trading CFD contracts – Forex, Stocks, Metals, Cryptocurrencies, etc.

SWAP for CFD trading is a fee for keeping a margin position open for a long period of time (more than a day). The key term here is the “margin position”.

If a trader opens orders with no leverage, for instance, trading on a conventional exchange, then there are no SWAP expenses at all. A trader honours the commission fee to this exchange and purchases the asset.

It is very different with leverage. In this case a trader doesn’t just make an exchange, he/she buys an asset for the maximum contract size possible, and to do so he/she needs to borrow funds from the broker, wait for the price to increase, then sell the asset back to the broker and gain profit for that.

In other words, it is not about purchasing an asset, it’s about earning on price difference. Such deals are called CFDs – contracts for difference.

Trading CFDs with leverage enables a trader to use funds that are larger than his own funds by scores, but it also means borrowing from the broker.

No borrowed money comes without interest. The minimum period for a loan accepted by all financial institutions is one day. This is why SWAP is charged once a day, if a margin position is kept open for more than one day.

SWAP is usually charged at midnight. If a trader manages to close his/her order before midnight strikes, which means within one day, then no SWAP is charged. It is not charged on weekends either, because banks are closed, but there also is a triple SWAP night – on the Wednesday-to-Thursday night the SWAP fee is tripled.

SWAPs on fiat markets

Summing it all up, we can say that SWAP is a type of commission fees charged by a broker for every open margin position on a daily basis.

How is it counted?

SWAP size depends on many factors, including the type of asset, its volatility, etc. The more exotic is the asset and the more volatile it is, the higher the SWAP. Vice versa, the lowest SWAPs are charged for the assets with the highest liquidity and the lowest volatility.

Market

Assets

Volatility

SWAP (annual rates applied)

Forex

Fiat currencies – USD, Euro, GBP, etc.

Low

3-4% annually

Stocks


Medium

10-15% annually

Commodities



15-20% annually

Cryptocurrencies


High

30-40% annually


ROLLING SWAPS FOR MARGIN TRADING CRYPTOCURRENCIES

As you can see from the table, SWAP reaches its maximum with crypto assets. It raises certain difficulties for traders. Every time a trader opens a crypto position in the evening, he/she is guaranteed to pay a rather large SWAP commission. Opening orders on Wednesday night become absolutely not worth it.

LH-Crypto has designed a different, dynamic model for charging SWAP – a special system that helps overcome these difficulties and find the perfect balance between the trader’s and the broker’s interests – it is called ROLLING SWAP.

ROLLING SWAP is designed to make SWAP cheaper for short-term orders that are closed within 1-3 days by increasing SWAPs for medium-term and long-term positions (more than 5 days).

The statistics show that 80% of traders close their crypto positions within 48 hours, and more than 94% - within 72 hours. Very few margin traders keep their crypto positions open for more than a week. Crypto exchanges suit better for such long-term positions, while cryptobroker offers short-terms operations with high leverage.

Technically, ROLLING SWAP functions as follows:

  1. RS is not charged at midnight, instead it is charged 24 hours sharp after the order is opened. Thus, there is no need to worry if you open a position in the evening, since your first SWAP will only be charged 24 hours later.
  2. No triple SWAPs days.
  3. SWAP increases in a linear fashion every 24 hours. The ROLLING SWAP is minimum for the first 24 hours, and it is several times lower than the traditional SWAP. Then it increases from day to day, reaches its maximum on the 6th or 7th day and then remains this high.

This method helps the majority of crypto-traders cut down their expenses. The traders who choose to keep positions for volatile crypto assets open for more than a week are advised to close this position and open it again in the same direction. In this case, SWAP is counted from the start, from the moment you open a new position.

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LH-CRYPTO is an online service for crypto-traders

LH-CRYPTO is an online service for crypto-traders. The service is available to everyone, except for the citizens of particular countries and several categories of people listed in the License Agreement. LH-CRYPTO is a free software for making conversion operations with CFDs on various financial assets nominated in cryptocurrencies.

The project does not manage funds and does not guarantee profits. The project only offers a service that allows to make conversion operations with cryptocurrencies on a specially configured software.

This website is maintained and supported by the following legal body:

LARSON AND HOLZ IT LTD

All the settlements in this project are processed solely in cryptocurrencies. Conversion operations are processed on the terms of margin trading without a direct supply of underlying assets. According to the generally accepted term, these operations are called operations with OTC (over the counter) CFDs (contracts for difference).

Trading with OTC CFDs involves considerable risks. We recommend you pay the utmost attention to both theory and practice of margin trading before making any of such operations.

The services provided by this project are not available for: residents of USA, North Korea, Sudan and Syria.