What is Swap in CFD?

In CFD, there is the payment of swaps every day: this is the interest rate of a cfd that the cfd instrument earns per day. This interest for a cfd instrument like the Australian Dollar is 5%, this means that every day a fraction of this five percent is paid to anyone holding this Australian Dollar.

This brings the Issue of paying & getting paid interest which is an Issue in the Islamic Religion. Islamic Religion doesn't allow paying & getting paid an interest payment, For Islamic cfd traders there is a trading account designed in accordance with their Values: Referred to as Swap Free.

For this account a trader will not pay the overnight rollover interest on any cfds and will also net get paid any interest, this is also known Shariah Compliant where there's no paying of RIBA (interest) - also referred to as Islamic Accounts.

For a trader to get a swap free account, a trader has to go to a cfd Islamic cfd broker and select option of "Islamic Account", This option is provided under the Accounts Section of the broker specifying the instructions of opening one of these accounts.

Once one opens a this account, then the CFD Trading rollover interest is removed. Once this no paying of interests is set, if a trader is using a platform such as MetaTrader 4 then the rollover fee record will be set to zero.

Rollover fee is charged daily at the end of the trading day for those holding a particular cfd instrument for which a swap is to be applied. As a trader if you do not want to pay this roll over you should close your trades before the end of the trading day, that way you will not pay the rollover fee as you are no longer holding open trade. Because the cfd market doesn't open on Saturday & Sunday, the rollover for these two day will be charged on Wednesdays, meaning on Wednesday one will pay the rollover for Wednesday, Saturday & Sunday, & therefore on Wednesdays this rollover fee is paid 3 Times.

These positions that pay a rollover interest are commonly referred to by traders as Overnight Positions. Day Traders rarely leave their trade transations opened overnight and close them all before the end of the day. Swing Traders on the other hand might leave their trade transations opened for a few days & leave these trades overnight so as to capture more movement in the price trend.

Once a trader finds a swap free cfd broker & opens & Islamic Account, the trader will have the same trading conditions as those of other traders, except for the paying of rollover fees. This means a trader will use the MetaTrader 4 Platform like all the other traders, the trader can trade all currencies, all indices, all CFDs, all metals and all other Financial Instruments provided by the cfd Islamic broker.

However, be careful in selecting a swap free broker, some brokers will add a commission or add some pips to the spread you trade with to cover the swap(Swap Fee Broker). This isn't supposed to happen as a trader will still be paying for the interest even though is disguised as another charge, good Brokers do not add any commission nor do they add any charge on to the spread.

Another thing is that some brokers will charge a rollover fee (swap fee) if the position held by a trader is held for more than 5 days or more than 7 days, this should not be the case and the broker should not charge any carryover interest even if the open trades are held for more than five or seven days. For traders wanting to open this swapfree account with a cfd Islamic cfd broker it's good to check for any additional terms of trading for the Islamic Account that you're going to be opening to make sure that the broker you select is really a no swap broker.

Islamic CFD Account

Swap free trading accounts were introduced by brokers after demand for carry-over interest free accounts grew among Islamic cfd traders. Traditional account entailed paying of rollover interests in what is known as rollover interest. This led to the introduction of Interest Free Accounts that Islamic traders could open & still keep in line with their rules on no paying & getting paid interest.