What is Swap-Free forex account?
Forex brokers charge traders a swap fee which is a commission or an overnight interest charged by the broker to extend the position for the next trading day, called rollover fee. The definition of swap is the agreement between two parties to exchange two currency pairs. A forex swap refers to the overnight interest rate for those who want to hold the position for overnight and reflects the difference of interest rates between the two trading currencies. Take note that a swap can be positive or negative for the trader depending on the currency you buy or sell and the interest rate differential of the currency pair.
Some traders and investors cannot earn or pay an overnight interest rate and therefore, forex and CFD brokers established the swap free (Islamic) account removing any interest rates overnight charges. Swap-free account is also known as Islamic account as the Islamic principles cannot recognize interest rate payment.
What are Swap fees?
A swap fee, also known as a rollover fee, is an overnight fee charged by the broker to keep your position open for the next trading day. The swap fee is calculated based on the interest rate difference between the two currencies of the pair.
Swap fee has the formula in order to calculate the overnight fee – Pip Value * Swap Rate * Number of Nights)/10
For example, let’s say you buy 1 lot of the EUR/USD at 1.1300. The interest rate difference is 1.55% between the interest rate in the United States and the interest rate in Europe in the case you buy the USD versus the EUR. Therefore, the calculation is (100,000 × (1.55) / 100) × 1.1300 / 365 = 4.79 USD
That would be the overnight interest rate you earn, otherwise, you will pay a fee for the opposite interest rate differential between the two currencies.
Top 7 Swap Free Forex Brokers in 2019
Plus500 is one of the most well-known brokers in the industry. The company is listed in the London Stock Exchange (LSE) with a market cap of $829M and offering a huge variety of products through the Plus500 trading platform. Plus500 is also offering an interest rate free Islamic trading account with no overnight charges, no rollover (swap) commission, a commission free account, and no deposit and withdrawals account. Plus500 is a highly regulated broker by different regulators in various regions including the FCA in the UK, CySEC in European countries, ASIC in Australia, New Zealand and South Africa MAS in Singapore.
The US is one of the hardest jurisdictions to get a forex broker license in the world, whenever you see a broker offering their services legally in the US remember that this means that you will be doing business with a stable and mature company. In the case of Forex.com, the company is the currency focused division of one of the most important prime brokers in the US (Gain Capital). Unlike many other flashy brokers in Europe, Forex.com has remained a silent force of the market, reserved for real forex traders and serious speculators worldwide.
The firm follows a fee and spread structure in which trading becomes cheaper based on the trading volume and how active traders are. If you are planning on following a strategy that will require heavy lifting and fast execution this might bet your best option in the US.
There are not many options one can choose from if you are a US resident, but without a doubt, Forex.com should be one of your top options.
FXTM, also known as ForexTime, offers the no ‘swap-fee’ on a broad range of accounts. The swap free option is available on ForexTime on all account types including the cent, standard, and ECN accounts providing the ability to extend your position to the next trading day without paying any overnight fees. The service is available for all countries listed as part of the FXTM platform.
Traders at FXTM can choose the Islamic (Swap free) account at the time of account creation or enable at any time.
The Australian broker Pepperstone is well-known forex and CFD broker in the industry offering swap-free (Islamic) accounts for those who cannot earn or pay overnight fees and interest rates. Opening a swap-free account with Pepperstone requires a minimum deposit of only 200 and offers a minimal spread of 1-1.2 pips. Traders that open the Pepperstone swap-free account will be charged an admin fee for open trades for more than 2 days.
Pepperstone is a regulated broker in Australia and in the United Kingdom.
One of the largest forex and CFD broker in the world IG Group offers its clients a swap free account that includes a wide selection of financial products without a rollover/swap overnight commission. The IG Group interest-free account was designed for those who cannot earn or receive interest rates on overnight positions offering a weekly, monthly or quarterly futures contract including foreign exchange currencies. IG Group is a public company listed in the London Stock Exchange and a member of the prestigious FTSE250 and is regulated by top-tier regulators.
AvaTrade offers an Islamic (swap-free) account available for all clients with restrictions or limitation on the account. In order to solve the interest rate issue for Muslims and those who cannot earn or pay an interest rate, AvaTrade launched the Islamic account with a minimum deposit of $100.
AvaTrade provides a range broad of financial instruments and markets including forex, stocks, indices, commodities, ETF’s and cryptocurrencies via WebTrader or MetaTrader 4 with competitive spread compared to other brokers in the industry.
ThinkMarkets is an Australian global provider of FX trading and CFD financial products which were founded in 2010. Formerly known as ThinkForex, ThinkMarkets is regulated by the Australian Securities and Investments Commission (ASIC).
ThinkMarkets offers the Islamic account to allow Muslim clients to trade forex while remaining in compliance with the Sharia principles. Think Markets Islamic account has no swap/rollover charges for overnight positions, no additional fees for the standard and premium accounts and spreads remain low as other accounts offered by ThinkMarkets.
eToro is one of the leading brokers in the forex and CFD industry. The broker was established in 2007 offering a social/copy trading platform for traders with a huge selection of financial products. The broker includes 3 million users in and 200,000 active users. eToro offers traders and investors an Islamic account with a minimum deposit of $1000 and attractive conditions for those who signed up for the Islamic account. Identification documents are also required to open an Islamic account with eToro.
Here are the advantages of opening an Islamic account with eToro:
- Zero rollover interest consistently. No overnight fees.
- eToro doesn’t charge any additional rollover commissions for contracts lasting longer than 24 hours.
- No account management fees. Only a buy /sell spread.
- Interest-free leverage.
66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Traders that must comply with the Sharia principles and cannot earn interest rate or pay an overnight/rollover fee should choose an online broker that provides a swap-free Islamic account. While some brokers charge additional fees for a swap-free account, others provide the same terms as any other account. You must find a broker that offers Sharia-compliance account.
All the brokers in this article are among the best forex and CFD brokers in the industry offering swap-free Islamic account for traders and investors.
Swap Free Account FAQ
What is the difference between a swap-free account and an Islamic account?
Islamic account and swap free account is the same thing – a forex and CFD account for traders and investors who cannot earn or pay the interest due to their religious beliefs based on the Sharia law.
What are the advantages of Islamic (swap-free) forex account?
A swap-free forex account is a trading account allowing traders to hold an overnight position without paying or receiving interest rate. For those who hold swing/long term positions, a swap free trading account can be profitable as they do not need to take into consideration currency pairs interest rate differentials.
What is swap fee in forex?
A swap fee or a rollover fee is a fee charged by forex brokers for traders who keep their position open overnight, meaning rolling the position into the next trading day. A swap fee is then calculated based on the currency pair interest rate difference. Some brokers offer a swap-free (Islamic) account to eliminated to swap fee.