What is Swap?
Swap is the interest rate differential between the two currencies in a currency pair that a trader pays or earns on a trade held overnight.
What is Free Swap?
Free swap is a type of swap-free account offered by some forex brokers, which means that traders do not pay or earn any swap fees on positions held overnight.
Example:
Let's say a trader buys 1 lot of EUR/USD at 1.2000 and holds the position overnight. The interest rate for EUR is 0.25%, and the interest rate for USD is 0.5%. The swap rate for this currency pair is -0.25% (0.25% - 0.5%).
If the trader is not using a free swap account, they will have to pay the swap fee of -0.25% on the notional value of the position (100,000 EUR). So, the swap fee will be -250 EUR.
If the trader is using a free swap account, they will not have to pay or earn any swap fees on the position.
