Scandinavian Capital Markets recently held its Premier IBs Conference in Johannesburg, South Africa, which turned out to be a huge success. The central theme was the evolution of the Forex landscape and what the future of Forex holds for everyone from a broker and trader point of view. The focus was on adding value and how Scandinavian Capital Markets play a role in improving the trader experience.Continue reading
September brings fresh starts – a new season, looking ahead into the future. It’s a chance to try new ideas and breath new life into your ventures.
Scandinavian Capital Markets has been busy launching new products, events, and corporate improvements to kick off the season the right way.Continue reading
By way of introduction into this new era of Forex trading, Scandinavian Capital Markets invited some of the top names in Forex trading. With opportunities to spend one-on-one time with Scandinavian Capital Markets founders Arif Ahmad and Michael Buchbinder, these lucky individuals are able to see how Scandinavian Capital Markets differs from the average Forex brokerage. From dinner with the team to tours of the office, and much needed r-and-r amongst the restaurants, spas, and sights, Vahalla participants get a bird’s eye view of the inner workings, and future aspirations, of Scandinavian Capital Markets.
Gone are the days of risky trading partnerships and shady brokers. The future of Forex casts aside dishonesty and subterfuge in favor of transparency and integrity. Thanks to Scandinavian Capital Markets, Forex traders can feel safe, protected, and supported as they become a part of the Valhalla experience. While other brokerages might treat their clients as numbers on a spreadsheet or as a profit center to be milked dry, the team at Scandinavian Capital Markets works as one help traders achieve their goals. The Valhalla Experience enables everyone to be a winner, by providing a high-end, concierge-level trading experience.
Meet Forex Expert Stephen Nefdt
Earlier this year, we spoke with Stephen Nefdt, owner of Forex Wealth in Cape Town, South Africa, became one of the first Valhalla Experience participants. With over 15 years of experience in all aspects of Forex Trading, Education and Trading System Development, Stephen knows what it’s like to navigate the murky waters of Forex trading.
While he began his career as a mechanical engineer, he became intrigued with trading at an early age. While he trained for the Iron Man triathlon and worked at several different engineering firms, he admits, “in the background, I was always trading stocks.”
Eventually, that part-time interest turned into a full-time career. “At first I became involved in consulting for banking, but eventually I decided to start looking at an exit,” he says. “Around 2005, I became involved in Forex on a full-time basis.”
What Stephen enjoys most about Forex trading is the energy. “In some instances, trading can be very boring, if not mind-numbing,” he says. “What I like about Forex is that it is very dynamic. There’s a lot that is involved. You have the global influences and other factors that cause the Forex markets to be fluid and multifaceted.”
Forex In Transition
With over a decade and a half in the trenches, Stephen is very rarely surprised with the ups and downs of Forex trading. Yet even though he’s seen it all, he is still astonished by the get-rich-quick attitude he sees. “Many people seem to think Forex trading is like accessing an ATM machine,” he says. “They don’t understand that you must put in the hard work to get results. There is no silver bullet that’s going to make them a millionaire overnight.”
For Stephen, prospering within the world of Forex requires discipline, wisdom, and practicality. “It frustrates me quite a bit,” he admits, “because, in Forex, you will never be bulletproof. You need to put in the work.”
Part of that work means putting in the effort to connect. And it was that opportunity of one-on-one time that sold Stephen on the Valhalla experience. “A lot of people seem to believe that in the digital age – with Skype and Facetime – you don’t have to see the person you’re working with face-to-face,” he says. “What I liked about my initial interactions with Arif and Michael was that right from the word go it was all about being genuine. It was about that 1-to-1 connection.”
Stephen in Stockholm
Once he got over his initial skepticism, Stephen embraced the Valhalla experience, particularly when it came to his interactions with the Scandinavian Capital Markets team. “This feeling of genuineness came through,” he says. “And in this day and age that is very rare.”
“I think what was really outstanding about the experience was meeting the people of SCM,” he continues. “What came across was the care: this is a company that actually cares about its people and their clients. They are genuinely trying to make a difference in the industry.”
“A lot of the Valhalla experience is embedded in the Swedish culture,” Stephen concludes. “It’s about doing business as ethically as possible. That you can have an honest business and still make money.”
Behind every new venture, there’s a story. Of course, there are always two sides: the real business model and the motivational legend. The first involves executive “sacred knowledge.” The second serves as a motivational legend for everyone else. In this article, I’d like to take a deeper look at the two sides that exist in any Forex story: the trader and the brokerage. More specifically, within the confines of Forex, how can a trader find profit and success?
I’d say the magic happens, as always, on the borderline. It occurs when you get a vision of both stories making sense synchronously. There’s no contradiction or limitation; comprehension arrives in a kōan-like manner. During my “ten year challenge,” in the trading industry, I’ve seen common misconceptions exploited in the service of sales mojo. Reflecting on my decade of experience, I’d like to explore those myths and legends and reveal how they affect the trader’s ability to succeed.
A Books, B Books, and Hybrids
When it comes to Forex trading, three systems determine how a client interacts with their broker: A Book, B Book, and the hybrid model. While A Book trades favor the client, B Book, or “dealing desk” trades are more beneficial for the brokerage. In a hybrid model, the clients fall into A Book or B Book based on their profitability.
So what’s the difference and what should you keep an eye on? In A Book trading, used by ECN/STP brokers, intermediaries are used to send client trading orders to liquidity providers or multilateral trading facilities (MTFs). This trading puts the client at the forefront and eliminates the conflict of interest that can exist when brokers trade against their clients. In this scenario, brokers make money by charging commissions on volume orders or increasing the spread. Because the broker makes money on both winning and losing trades, there is no incentive to bet against the client.
For Forex brokers using B Book, client orders are collected internally and the broker profits when the client fails. Brokers manage risk through internal hedging, spread variations, and by matching opposite orders. Because so many traders lose money in Forex, B Book can be very profitable for brokerages. Unfortunately, the profit comes at a price – the disadvantage (and loss of funds) of the client.
In a hybrid model, brokerages use software to identify successful and unsuccessful clients by analyzing their orders. By filtering traders based on the deposit amount, leverage, risk, and other elements, brokers can divide their clients into two groups: winners and losers. The winners get A Book treatment, and the losers must settle for B Book.
As you can imagine, A Book is becoming the popular choice for Forex traders because they aren’t at odds with their broker. Removing the incentive to bet against the client and focus on the trades activity to create profit creates a more amicable environment and helps forge a stronger relationship between the trader and their broker. Additionally, profitable trades actually increase trading volumes and positively impact the broker’s profits, which encourages brokers to help their clients succeed.
A/B-book vs. ECN Makes a Difference
Let’s start on the tech side. Whether your brokerage uses an A-book, B-book or ECN to execute trades is irrelevant to your performance. When choosing a brokerage, you want an organization authorized and regulated in a domain where the law is on your side. Why is that important? Because you want the ability and legal means to withdraw your profits without difficulty.
So what differentiates A/B book from ECN?
For starters, when you lose money on a B-book trade, it stays with the broker. Losses from A-Book or ECN stay with brokerage’s liquidity provider. Guess what happens when you earn more on B-book than your broker can provide? Well, in the latter case, it’s their own problem as long as you’re covered with a legit local Financial Supervisory Authority.
Another differentiator? Technically, B-book trades can sometimes execute faster because no market confirmation is needed. Of course, that depends on a fair B-book. It could be argued that the difference between A-book and B-book is illusory. For example, T4 plugins or custom bridges can use hooks to delay when an A-Book trade is communicated to the liquidity provider. It should be noted, however, that the idea of pure A-books and B-books are marketing rudiments of the past. Trades can be delayed automatically or by dealers before ever being communicated to the liquidity provider.
The illusion of faster trades is significant. If you are seeking an ECN with an advanced HFT algorithm that supposedly beats the market, for example, you might fall for a pitch that doesn’t deliver. Be vigilant when vetting brokerages. Keep in mind that some players try to trick the game with the existence of algorithms on the liquidity provider’s infrastructure. They do this by exploiting infamous arbitrage and ultra-high frequency tactics. Remember, they’ve been there for ages. Even if you plan executes, keep in mind the compliance department can block your withdrawals for any length of time based on any legal reason.
This is one platform that is better than the others
In an ideal world, we assume brokers use certified technology and can’t distort the market data or mess with your actions. Unfortunately, that’s not always the case. At present, no relevant regulations exist and, in most cases, nothing can be proven. In fact, the only reason the majority of brokerages does not do it is that 99% of traders lose their money themselves, sooner or later, legally.
Some uninformed brokers on the market do distort data or manipulate results. Fortunately, they quickly end up in the Forex Peace Army blacklist and fade away. Well, they don’t really fade away. They continue to show up periodically. Often with rebranded names, like Phoenix. You can spot them by the platform (usually not changed) and a dodgy registration location, like Vanuatu. If you’re curious, just Google the address of registration. If you see a dozen other companies registered for that same address, you know what type of beast you are dealing with.
Efficient. Reliable. Safe. These words describe the Swedish banking market, a financial and economic powerhouse that manages to balance honesty with profitability. Swedish banks are known for being trustworthy and steadfast, but how did they garner this reputation? Even more importantly, what does the security and reputability of the Swedish banking system mean for forex traders looking for alternatives to forex brokers based in Cyprus, Malta, St. Vincent, and beyond?
History 101: The Swedish Banking System
Sweden’s banking system has existed for centuries, growing stronger and more profitable with each new year. Sweden’s first bank, a private institution, was established by royal charter in 1656. Approximately 200 years later, the country’s first savings bank was founded. Currently, the Swedish banking system can be divided into four categories: commercial banks, foreign banks, savings banks, and co-operative banks.
A little over three decades ago – in 1986 – Sweden issued a charter for the first 12 foreign-owned commercial banks. Today, over 119 banks are operating in Sweden, including 29 foreign banks. Though Sweden is not part of the Eurozone, the country’s commercial banks offer euro-denominated accounts and payment services.
With close supervision by the Swedish Financial Supervisory Authority, Swedish banks are renowned as stable, trustworthy institutions – but that status was hard-won by the Swedish government almost 30 years ago.
Overcoming Obstacles: Lessons from a Housing Crisis
In the postwar era, Sweden was known as a prosperous welfare state, seemingly immune to the economic challenges facing most of Europe. In the boom period of the mid-1980s, Sweden’s financial system experienced large-scale deregulation, integrating Sweden with the world’s financial markets and triggering a boom-bust cycle for the Swedish economy. These actions created rapid debt growth, including the channeling of a large portion of the credit market into mortgages and property purchases. Housing prices began to rise, creating collateral for additional borrowing, and soon a bubble was born!
By 1992, Sweden faced a genuine financial crisis as the country’s housing market began its inevitable collapse. Similar to the dilemma faced by the U.S. in 2008, Sweden’s housing crisis threatened to take down the country’s entire financial system.
Faced with a hemorrhaging economy and a deflated housing market, the Swedish government stepped in to keep the country’s banks afloat. The government did this by bailing out the banks to the tune of about 65 billion kronor (approx. $18 billion US). But the bailout had strings attached: Each bank was required to write down its losses and issue warrants to the government. A bank support agency was also established while two banks, Nordbanken and Gotabanken, were taken over by the government.
A Model Business
The Swedish government’s actions were designed to keep the banks responsible for paying back the loans while also preserving the country’s financial system. The government did this by creating the Swedish Bank Resolution Model: A blanket guarantee of bank liabilities, maintaining political unity, providing open-ended funding, and requiring full disclosure of information by each bank of their current financial position.
In a sense, the Swedish government became a part-owner in the country’s banking system. As part of that role, the government initiated several actions to bring the banks back up to speed, including selling off distressed assets and using profits from those sales to recoup the cost of the bailout. In some cases, the government sold its shares in the bailout corporations as another way to fund the bailout. All of this was done with an eye on mitigating the damage to taxpayers while also strengthening the banking system so it could weather any future catastrophes.
Sweden’s tactics, when faced with the 1992 housing crisis, were incredibly successful. The country was able to keep the banking system itself running smoothly throughout the crisis, with a swift, streamlined process that managed to avoid bank runs, safeguard taxpayer money, and forestall involvement from outside organizations like the IMF.
In all, Sweden’s quick action bolstered its banking system’s international standing and built the foundation for Sweden’s continued prestige. Over the last decade, as established companies extended operations and new ventures were born, Swedish banks have leveraged their staying-power and high Tier 1 core capital ratios to increase their stature and competitiveness on the international stage.
Why Sweden and Forex Make Sense
Scandinavian banks are strong; with liquidity and solid investments backing up the industry. Known for being bastions of honesty and reliability, their reputation provides a framework for understanding why Sweden is the perfect environment for a new age of foreign currency exchange, one based upon a secure and stable banking infrastructure.
Sweden’s location is also a fundamental reason why forex traders taking a closer look at Stockholm. There’s no reason for traders to move their actions offshore to far-off countries when they can operate out of a closer locale. As the geographical center of Northern Europe, Sweden is not just the gateway to the Nordic nations, it’s a hub for the EU and UK, offering the ease of close-to-home trading without the onerous and impossible regulations currently stalling forex within the EU.
The New Power Duo: Scandinavian Capital Markets and Sweden
Armed with a vast knowledge of foreign exchange markets and deep roots in the Swedish banking system, Scandinavian Capital Markets can help you take advantage of all the benefits of doing business in Sweden. We don’t just deal with facts and figures; we provide context. We know what works and we stand recommendations and client support services because we can confidently rely on our first-hand knowledge.
Our team members have worked closely with Sweden’s largest banks, Nordea, Handelsbanken, Swedbank, and SEB. Our relationships with these long-standing, solid Scandinavian banking institutions means you have peace of mind because your funds are safe and secure.
For the last several years, we’ve had a front row seat to all the changes in the forex industry, and we’re ready to use our experience and wisdom to help our customers find success in the forex market. Whether you’re jumping into forex trading for the first time, or have years of experience under your belt, you deserve trading with confidence. Our clients can feel comfortable entrusting us with their funds because their money is always accessible; it can be withdrawn at any time. At Scandinavian Capital Markets, our commitment to transparency, honesty, and top-notch customer service mean you can trust us to lead you in the best, most profitable, direction.
Huge profits are enticing, but when it comes to Forex trading, bigger isn’t always better. In fact, for high volume traders, the opposite is often true. That’s because high volume traders, those individuals trading anywhere starting from $100 million to $300,000 million or more a month, are rarely able to leverage their trading volume to receive more competitive pricing.
Usually, when traders first start out, they sign up with a retail broker and pay the standard fees. As their volume of trades increases, a trader may start hunting around for a better deal. More often than not, they come up empty. Instead of being rewarded for assuming more risk and committing more resources, high volume traders end up seeing their commission rates rise along with their trading numbers.
Breaking It All Down
Yards, tiers, lots…it all sounds like different ways to measure trades, and in a way, that’s true. A yard in the trading world refers to one-billion and is used as a concise way of naming a figure that could be confused with “million.” For example, if a trader purchases $1 billion U.S. dollars, they could refer to that purchase as “buying a yard of dollars.” A lot, on the other hand, defines the number of currency units bought or sold. In general, a standard size for a lot is 100,000 units of currency, though now mini, micro, and nano lot sizes also exist (10,000, 1,000, and 100 units).
In forex trading, tiers can refer to many different actions and products: from the types of trades (retail vs. wholesale) to the level of trading volume. Tiered pricing for stocks, ETFs (Exchange Traded Products, or ETPs) and warrants usually refers to a system by which broker commission decreases depending on the volume of trade. Different levels of tiers will trigger different commission rates and possibly result in a rebate at the end of the trading cycle.
So what does this all mean? Basically, depending on how many lots or yards you purchase, in a tiered rate system, your commission will decrease as the volume increases. For high volume traders, trading lots of ten or more can be quite common, and the purchase of a yard of currency can put you in the highest trading tiers.
The Cost of the Trade
Trading platforms, tools, current pairs, leverage maximums, and customer service are all key metrics essential to selecting a forex broker. But for many brokers, cost remains the main differentiator. Unfortunately, cost can be difficult to quantify, especially when brokerages hide their charges in complicated bid-ask schemes or complex pricing models.
For forex trading, tiered-rate accounts are used to determine the rate of commission. For example, a client may pay a commission rate of $50 per trade up to ten lots. Once the number of lots surpasses 10, the commission rate goes down. Most forex brokers do not offer tiered volume structures and those that do tend to lack any automation of the volume rebate incentive. In fact, the brokers who promise tiered-rate accounts usually fail to deliver, so a client increases the volume of their trading without reaping any benefit.
Many brokers simply charge commission, with fees charged per trade or group of trades. Others earn money through the bid-ask spread, which may seem like a better alternative but, more often than not, simply results in fees being rolled into the spread.
Congratulations on discovering a better way to trade. Whether you know it or not, you are about to embark on a journey that will lead you to the frontier of foreign exchange currency trading, one that is simpler, more transparent, and designed to provide you with the tools you need to succeed and thrive. Think of yourself as a pioneer, an explorer, an adventurer on the hunt for a new way to enhance the trading experience and find the right brokerage to fit your individual needs.
But before we begin, I’d like to ask you one thing…
Are you tired of feeling like just another account number?
While we respect and understand the challenges faced by new and experienced forex traders, here at Scandinavian Capital Markets we place a higher value on relationships than profits. We never resort to deliberately confusing or lazy, one-size-fits-all solutions. We believe in treating all of our clients as individuals. We also strive to help you maximize your trading opportunities, while also helping you gain a better understanding of the forex trading eco-system.
The entire Scandinavian Capital Markets team stands united in our commitment to providing you with a comprehensive trading platform using the latest technologies to make it fast and easy for you to become a forex trader; or push your existing forex trading activities to a higher plane. Our extensive experience in forex trading and international banking mean we know what works and what doesn’t. We can anticipate the challenges and obstacles you will face, and our broad knowledge of foreign exchange markets and platforms can help you navigate the maze of options available to you.
With Scandinavian Capital Markets, you don’t just get a trading platform, you get an innovative, forward-thinking, customer-focused brokerage ready, willing, and able to help you reach all your financial goals.
How do we do it? By combining a powerful new trading platform with years of experience and knowledge.
Scandinavian Capital Markets Banking: Safe and Secure
While other brokerages might conduct their business using offshore banks, our banks are in the European Union which provides a blanket of security for European traders to keep their funds within the EU. Currently, Scandinavian Capital Markets holds client funds in three of the largest Scandinavian banks: Swedbank, SEB, and Nordea. These three banks are known throughout Europe for being very well capitalized and safe. Liquidity is aggregated from different pools of banks and non-banks to provide competitive pricing. As a Swedish broker, we deal with well-capitalized Scandinavian banks, an alternative unavailable to offshore brokers like those located in Cyprus, St. Vincent, or Australia.
Competitive Pricing and the Liquidity Solution
In most cases, when a Forex trader deposits money with a broker that broker must send a portion of the deposit to their Liquidity Providers for margin purposes. This allows the trader to execute trades with the broker and for that broker to properly STP your trades to the Liquidity Provider. In this scenario, your funds are no longer sitting in the bank account of your Forex broker, but rather they are with the bank account of the Liquidity Provider. This traditional setup can put your deposit at risk with a counter party you may have never heard of.
Scandinavian Capital Markets is changing that though and proposing a new way of working with Liquidity Providers!
Scandinavian Capital Markets’ new liquidity solution means we will no longer send money to Liquidity Providers. By working with our liquidity providers, we have eliminated the need to send them margin capital. That’s just another reason our client’s can rest assured we work hard to protect their funds and eliminate additional counter party risk.
The Future of Forex
Scandinavian Capital Markets’ banking relationships are strong, making us well positioned to provide excellent security for our clients’ needs. In the future, we will be adding additional many well-known Tier 1 banks to our roster. Our goal is to make our traders feel safe and provide top-notch security through fast deposit and withdrawals at our top tier banks.
Scandinavian Capital Markets strives to restore hope to forex traders who’ve been burned in the past by shady dealings and dishonest brokerages. We take a transparent and tech-oriented approach to forex trading, and that lets us create an entirely new forex experience.
Our innovative, integrative, tech-focused approach means you won’t just get one type of service. Instead, we will position you to take advantage of all the resources we have at our disposal, including our team of world-class management and analysis professionals. Having this all-star squad at our disposal means we can provide you with a truly customized customer service and help you make the most out of your forex trading.
Commitment to Excellence
At the end of the day, we measure our success by how well our clients navigate the forex landscape. We feel lucky to help our clients discover the trading opportunities – and we are there, every step of the way, providing not just a trading platform, but a comprehensive trading experience.
Traders are always concerned about the safety of their funds. We understand those concerns, and everyone on the Scandinavian Capital Markets team is committed to making sure your funds are always safe and secure. One way we accomplish this goal is by following banking best practices that involve establishing long-term relationships with solid and reputable banks in respectable jurisdictions. Our ace in the hole? Our home-base of Scandinavia, a historic banking safe haven, known for its neutrality, honesty, and steadfastness. At Scandinavian Capital Markets, we are proud of our Swedish roots and our nation’s historical emphasis on fair-dealing and stability to provide an innovative forex service that combines the benefits of innovative technology with superior customer service.
Ready to experience the future of forex?
Prime Minister Winston Churchill famously said, “If you’re going through hell, keep going.”
For many seasoned forex traders, the last few decades have felt like a long, hot, slog through purgatory; burned by untrustworthy brokerages and watching helplessly as profit slips through their fingers. Those who survived are, in many ways, the wounded warriors of forex: down, but not beaten. Weary and battle-worn, but not defeated.
Because, as General Custer advises all those who’ve met with defeat: It’s not how many times you get knocked down that count, it’s how many times you get back up.
From the Ruins, An Idea Emerges
In 2011, after establishing the Wealth Management Company, Arif Alexander felt the first tremors of change. Once he’d partnered with Michael Buchbinder, the two forged ahead to build a company based on the shared values of integrity and trust, putting client needs at the top of their list of priorities.
It wasn’t an easy decision. After working for years in the traditional forex industries, both Arif and Michael knew all the obstacles, boobytraps, and landmines they would have to traverse if they wanted to create a clear path to success for their clients. But they could not ignore the whispers that soon turned into cries for change: traders detailing all the ways they’d been cheated, mislead, and bilked. They were losing money – lots of money – and didn’t know whom they could trust.
They couldn’t track, or even define, the success or failure of their efforts. Even worse, they suspected there was nobody they could turn to.
Because of their own firsthand knowledge of the industry, Arif and Michael knew the forex playbook well. And that hard-fought wisdom – combined with brutal, boots-on-the-ground, experience – is what inspired them to build for a new type of forex brokerage.
This was a cathartic moment – a grand epiphany.
They wondered, “How can we rehabilitate the forex industry and help traders succeed?”
Delving deeper, they began to question the brokerage-trader relationship at its core. We all know forex is a heady, enticing game – full of quick deals and high hopes, and more than a little bit of chicanery. Arif and Michael wondered how, in this increasingly dishonest and insubstantial forex work, where traders are beholden to confusing fee schedules and fly-by-night companies that evaporate (deposits and all) overnight, they might reintroduce trust and integrity?
The Glories of Valhalla
In Norse mythology, Valhalla is a majestic hall located in Asgard and ruled over by the god Odin. Half of those who die in combat are chosen by Odin to travel to Valhalla upon death. These lucky soldiers, led by valkyries, join legendary Germanic heroes and kings in this shining, golden land. It is a respite for the battle-weary and a bright dawn for those who are tired of fighting and have earned the glories of a new day.
The modern Scandinavian business model builds on the idea of Valhalla because it lives on a framework of security and honesty. In Sweden’s new Valhalla, customers are returned to an unharmed state, safe and secure as their guardians man the gates. In Sweden, the sins of the past are gone, but not forgotten. Solid bulwarks have been erected, and businesses – specifically investments, finance, and banking – operate under strict rules and guidelines so that everyone is on an equal playing field.
Valhalla is the vast hall guarded by wolves. It’s the cornucopia overflowing with fruits and wine. It’s long feasting tables and five hundred doors, through which endless abundance flows, capable of satisfying any thirst.
A Forex Paradise
Scandinavian Capital Markets is building a forex Valhalla. The focus of Scandinavian Capital Market’s Valhalla experience is the person, not the profit. Other brokerages see traders as numbers on a spreadsheet’s profit center to be milked dry.
The Valhalla experience, on the other hand, is all about the human side. It starts with treating clients like partners. The entire Scandinavian Capital Markets team works as one to serve them better to help them achieve their goals. Valhalla was designed to help make traders win.
More than just icing on the cake, being located in Sweden allows Scandinavian Capital Markets to provide a high-end experience to clients. The cultural aspects of Stockholm – the food, the spas, the people – are unmatched anywhere in the world. Sweden offers respite and reinvigoration, just like those ancient visitors to Valhalla.
Scandinavian Capital Markets is committed to engaging with clients that want service and quality for sustainable business. Imagine flying business or first class to Stockholm, booking an appointment at a nurturing, Swedish spa, and ending your day with a meal at a high-end restaurant and full night of restful sleep. Imagine laying your head on the pillow and knowing your business day ahead finds you working with a team of committed partners, ready to listen and plan with you. Imagine you are once again made whole – you can trust, you can rise again.
Here’s a question: What is a forex swap? If you are like many forex traders just starting out – or even if you have many years under your belt but very little time to accumulate a lot of knowledge about the forex industry – this might be a tougher question than it appears.
Don’t worry. We’re here to help!
At Scandinavian Capital Markets, we are committed to building powerful relationships with our clients. We see ourselves as partners in our customer’s success. That means we value transparency and education. We want our clients to understand the market, have a basic understanding of how interest, earnings, and fees are calculated, and why things happen the way they do. As we travel down the road to success together, we will continue to provide insight and help our clients become forex experts.
Get to Know Your Swap
So what is a swap and what do you need to know about them? In general terms, a forex swap is an overnight (or rollover) interest earned or paid when a trader holds positions overnight. Most of the time, a trader is required to take delivery of currency purchased within two days of the transaction date. However, if the trader chooses to roll over that position, they can extend that settlement period by one day. The rollover usually includes simultaneously closing the trader’s existing position at the close rate for that day and the re-entering the new opening rate for the next trading day.
Why Do Swaps Matter?
Forex traders are interested in making money on changes in exchange rates. That means currency purchases aren’t literal – the trader wants to play the margins to make a profit when that currency’s value alters. Every forex transaction involves borrowing. A trader borrows currency from one country to buy the currency of another country. This borrowing generates interest, either owed or paid.
Swaps matter because earning or owning currency becomes a strategic decision. To earn interest, a trader may take a long position in a high-yielding currency compared to the currency they used to make the purchase. In the event the borrowed currency outperforms the purchased currency, the trader will owe interest. To avoid paying interest, it might make sense to close at the end of the business day (5pm Eastern Standard). On the other hand, if a currency is performing well – and the trader anticipates that performance will continue – a swap may be the best way to prolong the trade and increase the profit.
This piece will also contain the history related to swaps, how did swaps come to be (Central Banks history leading up to swaps being within the forex world).
How Are Swaps Calculated
Swap fees are incurred when a position is kept open overnight. The forex swap fee is determined by calculating the difference between the two currencies being traded according to whether the trader’s position is long or short. The interest rates between the two currencies in the swap can be negative or positive depending on if the trader is borrowing or lending.
Generally speaking, rollover rates are calculated by subtracting the quote currency interest rate from the base currency interest rate and dividing that sum by the amount calculated when multiplying the base.
A rollover rate can also be called a swap fee; The swap rate, on the other hand, the rate at interest at which one currency is exchanged for another. In other words, a swap rate is the difference between a traded currency pair. interest in another currency – that is, a swap rate is the interest rate differential between the currency pair traded. The rollover rate can also be known as the swap fee.
A way to see how swap rates and rollover rates work in forex, imagine trading between AUD and JPY currencies, and the JPY carries an annualized lending rate of .25% while the AUD borrowing rate is 1.64%, then you would gain 1.39% per year by holding AUD/JPY in a long position. Holding short, on the other hand, would change the lending/borrowing rates, increasing AUD to 2.74% for example, while decreasing JPY to -.15%, resulting in a decrease of annual swap charges by 2.89%
It’s true that the swap calculation equation can be complicated. Thankfully, there are many online swap calculators that can help you determine what you might owe in fees. Keep in mind that the interest you gain or pay changes across brokers and is heavily influenced by the timing of your trades. That’s why it’s important to work with a brokerage that provides clear information up front. Check with your broker (or any broker you are considering) and look at their swap rates table. In addition, if you are using the MT4 platform, you can right click on the “Market Watch” section and select “Symbols” to see your broker’s swap rates.
Finally, it’s important to remember that a trade position held open overnight from Wednesday to Thursday, will be charged triple storage because the swap involves pushing back the value date on the underlying futures contract. In other words, when a position is opened on Wednesday, Friday becomes the effective value date. If a position is kept open overnight from Wednesday to Thursday, then the value date is moved forward three days, skipping the weekend and making Monday the effective value date – so the charge is triple to reflect holding for three days rather than one. Storage is tripled because you are being paid or charged interest for three days instead of just one.
Scandinavian Capital Markets and Swap Trades
Scandinavian Capital Markets swap rates are calculated each day at 5 pm Eastern Standard Time / 12 pm MT4 platform time (GMT+2). Any trade that has been opened before 5pm and held open past this time will be subject to swap rates. Swap rates are tripled on Wednesday at 4.59 pm to account for weekends. Please note that swap rates vary by pair and are updated frequently as market movement causes swaps to adjust. It is important for traders to familiarize themselves with where to locate the current swap charges for the particular pairs they are trading.
Let’s talk about what makes a successful forex trader. At Scandinavian Capital Markets, we don’t rest on our laurels or make our clients wade through red tape or leave them at the mercy of complicated explanations about forex trading. Our experienced, nimble team of forex experts can cut through the layers of confusion and deception, deftly wielding their market knowledge and experience to clear the path ahead.
But before we get into all that, let me ask you a question.
If you could conjure the perfect forex trading environment, what would it look like?
This isn’t a fanciful thought experiment. Without an accurate idea of what you’re aiming for, it’s difficult to know where to start. So the first step involves understanding exactly what you need from your broker.
Every one of our client relationships is built on trust and accountability. We don’t promise what we can’t deliver, and you’ll find that everyone who’s worked with us will attest to our tenacity and honesty. Our commitment to teamwork and mutual respect filters down into every aspect of our business, from the top down. When the clients are happy, we’re happy, and that satisfaction is apparent in everything we do. There are no clouds on the horizon at Scandinavian Capital Markets because we don’t focus on profit; we focus on success.
But you don’t want platitudes; you want specifics. So here’s how we structure our forex trading services.
The Framework for Success
We excel at speed and simplicity. We don’t play around with long, drawn-out processes. We proceed smoothly and efficiently, with our eye always focused on the final prize: the successful trade.
We start by empowering our team members to focus on our customers. No matter the number of trades or years of experience, our top priority is helping our clients seize opportunity. With a clear goal in sight and plenty of communication and transparency, we strive to create a hospitable, honest, and reliable trading environment. Our goal is to develop long-standing relationships by demonstrating to our customers that we are the experienced and capable professionals they can trust to lead them through the forex forest.
We’re always willing to dive into the details. We look closely at patterns and stay up-to-date on trading standards. We study demographics to see how a region’s currency is evolving and what the next great move might be. Moreover, because we’re always looking towards the future, visualizing what success in forex might look like over the next five or ten years, we can mitigate surprises and help our clients plan for long-term success.
Hitting Roadblocks, Clearing Obstacles
Account set up is straightforward, and our customers can get trading quickly, but not blindly. We can help our clients act fast because we’re small enough to adapt and knowledgeable enough to anticipate what lies ahead.
When our traders hit a snag, we’re here to help. We won’t shy away from assessing problems and proposing solutions. We let our clients know if strategies should be altered or expectations need to be adjusted. We’ll help discover the unconventional solution and work hard to find a method that allows everybody to get what they need.
We are committed to the success of our clients, and our familiarity with forex markets enables us to develop the right strategy for the desired outcome. Other brokers may make a lot of money letting traders proceed blindly (or even through deception), but they end up burning clients and bring shame to the industry. For us, it’s not about making more money; it’s about seeing our clients prosper.
Float Like a Butterfly, Sting Like a Bee
Scandinavian Capital Markets is not the elephant in the room. Our team runs on efficiency, and we cut out unnecessary processes to get you from point A to point B and all the way to Z as quickly as possible. We have the freedom to help our clients act on opportunity, and you can feel confident in our ability to change course when needed and adapt to the changing market landscape so that you are best positioned to capitalize on all the opportunities available.
We will lead you every step of the way, from the very first spark of an idea all the way through to your first trade. By keeping an eye out for developing opportunities, we’re ready to make a move when we get the call or see the chance.
It’s a common refrain at Scandinavian Capital Markets, people matter, not profit. Sure, it sounds like a glib, market-ready tagline, but it’s our rallying cry. At Scandinavian Capital Markets, we treat every client as a partner and every team member as an invaluable asset. We listen. We care. Our Valhalla experience adds a personal touch and provides a bespoke service to clients and building rapport and the basis for a long lasting relationship.
We value our clients, and we work hard to make sure there’s an open dialogue between our founders, our staff, and our customers. No surprises. No unanswered calls or non-committal responses. When you are part of the Scandinavian Capital Markets team, as a client or an employee, you are valuable. It’s the people that make this whole endeavor worth it, and it’s our clients and staff who are helping to write the Scandinavian Capital Markets story.