What are swaps?
What are swaps?
The swap is essentially a fee for holding a position overnight. Generally, this fee is to do with the central banks’ interest rates of the underlying currencies quoted in the currency pair with brokers possibly adding an extra commission on top of swap. This fee can either be debited or credited to your account depending on the interest rate differential.
For example, let us take the GBP/USD. If we are long the currency pair and the central bank interest rate for the UK is higher than the US’ central bank, you should experiencing something called a positive carry – where the interest rate received from holding the GBP position long is higher than the interest rate paid holding the USD short.
In contrast, if we were short the currency pair we would experience a negative carry – where the interest rate received from holding the USD position long is lower than the interest rate paid holding the GBP short.
Silver got no love last week, suffering its worst week in thirteen weeks, and raking up a fourth straight month of losses. After losing US $1.35/t.oz between September 13 and September 18, the metal closed on Friday at US $22.38/t.oz. Before last week, Silver had not traded sub-US $22.50/t.oz for the entire 2021. One would have to rewind their charts to November 2020 to find Silver trading below US $22.50/t.oz.
The last two weeks haven’t exactly been ideal for the major US indices. In times like these, perhaps it is good to remind ourselves how far the indices have come in the year to date. If anything, reminiscing about the indices extraordinary gains in 2021 should help us contextualise the minor misfortune befalling stocks and indices in September.
Palladium is currently trading at USD 1,974/t.oz, a 13-month low for the soft silver-white mineral. In August 2020, Palladium was trading at such a price before it shot up within a hair’s width of USD 3,000/t.oz. The metal’s current price is sitting snuggly between two weak touchstone levels. Over the coming trading week, we could see Palladium claw itself back up to USD 2,200/t.oz, rejecting prices as low as USD 2,000/t.oz but remain suppressed from current levels or break lower into a pocket between USD 2,000/t.oz and USD 1,760/t.oz
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Risk Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any questions or concerns as to how a loss would affect your lifestyle.
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