Swing and position trading
What you learn in 3 minutesA reader asked: if I hold a trade for four days instead of one, what actually changes in my account? This lesson answers that in rand. You will see how the cost of holding moves from the spread to the swap, and how the risk moves from one session to overnight gaps.
Four days on USD/ZAR: 20 pips, R200 gross, R144 net
| Step | Amount | Note |
|---|---|---|
| Instrument and price | USD/ZAR at 18.4100 | Example price used throughout this lesson |
| Position size | 0.10 lots | A standard lot is 100,000 units, so 0.10 lots is 10,000 units |
| Value of one pip | R1.00 | 0.0001 × 10,000 units = 1 rand per pip |
| Price move over four days | 20 pips | From 18.4100 to 18.4120 |
| Gross profit | R20.00 | 20 pips × R1.00 per pip |
| Spread cost at entry | R1.50 | A 1.5 pip spread on 0.10 lots; spreads vary between brokers and by time of day |
| Swap over three rollovers | R4.50 | R1.50 per night held; swap rates vary between brokers and can be positive or negative |
| Net result | R14.00 | R20.00 − R1.50 − R4.50 |
The broker may round the swap, add a commission, or apply a wider spread at rollover. Swap is usually charged per night, and some brokers charge triple swap on one weekday. Check your own platform's contract specifications, because these figures vary.
The mistake people make here
The common mistake is to judge a swing trade only by the price move and forget the swap. In the example above, the swap took R4.50 of a R20.00 gross profit, which is almost a quarter of it. Another mistake is to leave a position open without checking whether a major announcement falls overnight, because a gap can skip past your stop loss. Before holding for days, write down the swap per night, multiply it by the nights you expect to hold, and compare that number with the move you are targeting.Check yourself
You hold 0.10 lots of USD/ZAR for five nights. Swap is R1.50 per night. What is the total swap cost in rand?
5 × R1.50 = R7.50.
Your gross profit is R30.00. Spread costs R1.50 and swap costs R7.50. What is the net result?
R30.00 − R1.50 − R7.50 = R21.00.
One pip on 0.10 lots of USD/ZAR is worth R1.00. How many pips do you need to cover R9.00 of costs?
R9.00 ÷ R1.00 per pip = 9 pips.