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Monday, 18 June 07:44 (GMT -05:00)

Foreign exchange market

AUD/USD Swap: New Opportunities for FX Traders

AUD/USD is a highly popular currency pair among Forex traders since the currency pair presents excellent trading opportunities, especially if the trader takes advantage of the leverage offered by the Forex broker. In this case, profit may be even bigger than those stock traders and investors make.



In case you don’t know, the difference between the 10-year AUD/USD high and low is over 7000 points! This means that at some point over the mentioned period, the Aussie was both twice as cheap as the U.S. Dollar and even 12% more expensive than its American peer.
Long-Term Investments. Swaps Rule!
Essentially, AUD/USD exchange rate depends on multiple factors, which are not limited to the policies pursued by two major central banks as well as the global economy. There are some other factors related to the world’s most influential currency as well as major commodity currencies.
With that being said, we cannot tell for sure when the exchange rate will change but we can tell how it will change in the future. However, we’ll dive deeper into this a little bit later. For now, it’s safe to say that the Aussie is sure to start growing against the U.S. Dollar. That’s why we can start entering long-term buy trades using the leverage provided by our brokers.
Our strategy corresponds to the idea proposed by Masterforex-V Academy. The idea implies creating unbeatable investments. However, this unbeatable investing will come true only if we choose the right broker on top of allocating the right amount of our capital and making the right market entry. It’s all about swaps, when it comes to long-term strategies.


In order to help us make the right chose, Masterforex-V Academy experts came up with a comparative table of FX brokers and their swaps for AUD/USD.


As you know, the swap is a fee paid for extending the trade overnight. However, swaps can be both zero, positive and negative, which is confirmed by the table above, courtesy of Masterforex-V Academy. So you have to pay only if this is a negative swap. On top of that, while some brokers offer tight negative swaps allowing us to open mid-term and long-term trades, others make those swaps too wide to practice this kind of trading since they literally eat the trading capital over time.
With that being said, it’s clear that mid-term and long-term trades need brokers with positive spreads. However, even more modest trading conditions can let you profit this way.
In order to put it into practice to check how swaps affect profitability of long-term investments, first let’s divide the brokers into 3 groups. The book on unbeatable strategies by Masterforex-V says that swaps are kind of hidden spreads. This become obvious when you extend the trade overnight. The table above shows us what those swaps may turn into over an extended period of time. Let’s first consider some positive things:
1.     Brokers with positive swaps for AUD/USD represent quite a large group of brokers. This means that every day the long-term trade makes you richer. Still, we recommend paying attention to the following 6 brokers with positive AUD/USD swaps:
- Nord FX - 6,00 per day, which means that you can make $1080 on swaps just for holding a position for 6 months.
- Prime Broker lets you make $1026 in 6 months when holding a BUY AUD/USD trade.
- Fort Financial Services - 5,48 per day or $1972 in 12 months when holding a BUY AUD/USD trade (1 standard lot).
- Royal Financial Trading - 1,80 per day.
- AAAFx - 1,11 per day.
- Forex4you - 0,60 per day.
- OctaFX - 0,58 per day.
2. Brokers with zero swaps. You neither win nor lose by holding long-term AUD/USD trades in this case. The list of such companies includes:
- One Trade.
- Windsor Brokers.
- FirewoodFX.
- Admiral Markets.
- City Credit Capital.
- Forex.com.
- IG.
3. Another large group is the brokers offering negative swaps for AUD/USD trades. Here we can mostly see minor daily losses equal to 0,1-0,2 points. The biggest negative swaps can be found with the following 5 companies:
- Key To Markets - $72 and $144 spent (lost) on swaps in 6 and 12 months respectively.
- InstaForex - $72 and $144.
- AvaTrade - $75,6 and $151,2.
- FXDD - $145,80 and $291,6.
- AGEA - $154,8 and $309,6.
Experienced traders say that it’s important to analyze and avoid others’ mistakes if you want to make money in financial markets.
Forex is the financial market for those who want to become:
a)    Pro traders – you can do so by joining Masterforex-V Academy’s private forum for traders and investors, with daily practice and professional assistance.
b)    Pro investors – you can copy VIP traders with unbeatable strategies for free. If you open an account and deposit $3000 or more, you get 12-month free training package at Masterforex-V Academy, become a local investment club member and also get fee access to the private investor school under Masterforex-V Academy.
How do swaps affect potential profits?


The monthly AUD/USD chart below reflects the history for the last 22 years.


The chart shows that the currency pair is at the end of the 4th wave of the upward trend. In other words, this is the time when the price should complete the retracement and resume the rally.
When analyzing the length of the waves, we can arrive at a conclusion that the 5th wave is probably going to be at least 5000 points long. Yet, this is the most modest forecast. However, in order to come such a long way, the currency pair may need up to 3 years.
Scenario 1. We are going to reach our moneymaking goal by using the data form the comparative table. To be more specific, we need to calculate in advance how the swaps will influence our profitability. Once again, we have 3 variants to choose from:
1.     We open a long-term trade with a broker offering zero swaps. If we happen to be correct and the currency pair goes 5000 points up in 3 years, we get 5000 points of net profit. Plain and simple.
2.     We open a long-term trade with one of the 6 brokers offering positive swaps. If we happen to be correct and the currency pair goes 5000 points up in 3 years, we get 5000 points, plus the amount gained from those positive swaps over the period. So, the net profit (in points) will vary from broker to broker:
·      - Nord FX - 11 480;
·      - Fort Financial Services – 10 918,4;
·      - Royal Financial Trading – 6 944;
·      - AAAFx – 6 198,8;
·      - Forex4you – 5 648;
·      - OctaFX – 5 626,4.
As you can see, with the first 2 brokers, the net profit will be 2,3 times bigger thanks to the positive swaps.
3.     As for the negative swaps, unfortunately, they will be deducted from the net profit. If you go with the brokers with the biggest negative swaps, this is what you will end up getting:
- Key To Markets – 4 568;
- InstaForex – 4 568;
- AvaTrade - 4 546,4;
- FXDD - 4 125,2;
- AGEA - 4 071,2.
As you can see, your losses may reach almost 20%, which is not something critical but still unpleasant since nobody wants lost profits, especially if you choose between getting 11,5 points of profits and just slightly over 4000 points under the same circumstances. This is the factor that should be decisive for your long-term investments.
Scenario 2. We stop halfway. In the previous scenario we reached the desired result, i.e. captured the expected profits. But what if we decide to abandon our idea at some point further down the road? Let’s consider possible results in case of early closure and assuming that the price is moving our way.


The weekly chart of AUD/USD clearly indicates that the price has been flat for the last 6 months:


The price range is really tight. The support is at 0,7160, the resistance is at 0,7730. The current price we can buy at is 0,7490. There is no reason to expect the price to stay in the range within the next 18 months, right? This is the period we should consider. This is the very halfway to give up on the trade. If the price stays within the range, the profit potential is jut 240 points while the loss potential is 330 points. How can swaps affect the end result in 18 months?
Apparently, with zero-swap companies the result won’t change. With positive-swap brokers, we get the following results (price growth/price drop to the borders of the price range):
- Nord FX: +3 480/+3 010;
- Fort Financial Services: +3 199,2/+2 629,2;
- Royal Financial Trading: +1 212/+642;
- AAAFx: +839,4/+269,4;
- Forex4you: +564/-6;
- OctaFX: +553,2/-16,8.
OK, if we exit at the top of the range, we always take profit but if we exit at the bottom of the range, the worst-case scenario is minor losses.
However, if we go with a broker with negative swaps, this is where we get big losses:
- Key To Markets: +24/-546;
- InstaForex: +24/-546;
- AvaTrade: +13,5/-556,8;
- FXDD: -197,4/-767,4;
- AGEA: -224,5/-794,4.
In this case, the best we can count on is tiny gains against really big potential losses.
Financial results. In order to define possible profits or losses according to our scenarios, all we need to do is decide how much money to invest. Specifically, you multiply the cost of one point by the total amount made or lost in the trade to gent the result in absolute figures (dollars in our case). Just for the sake of example, let’s assume that 1 point is roughly equal to $10. Given the cost of 1 point, these are the financial results for zero, negative, and positive swaps:
1. Nord FX (the swap is +6,00 a day):
- Profit made in 3 years if 5000 points of profit captured – $114 800.
- Profit made in 1,5 years when exiting at the top of the range – $34 800.
- Profit made in 1,5 years when exiting at the bottom of the range – $30 100.
2. Any company with zero spread:
- Profit made in 3 years if 5000 points of profit captured – $50 000.
- Profit made in 1,5 years when exiting at the top of the range – $2 400.
- Loss generated in 1,5 years when exiting at the bottom of the range – $3 300.
3. AGEA with a negative swap of -0,86 a day:
- Profit made in 3 years if 5000 points of profit captured – $40 712.
- Loss generated in 1,5 years when exiting at the top of the range – $2 245.
- Loss generated in 1,5 years when exiting at the bottom of the range – $7 994.


So, the figures speak for themselves. While positive swaps let you make money even under unfavorable trading conditions and considerably increase the net profit if the goal is reached, negative swaps play against you and create unnecessary risks while making it possible to profit only in the best-case scenario.



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