Best carry interest indicator for MT4
In financial markets, the term ‘carry interest’ refers to a share of the profit of private equity or hedge fund that the managers of the fund charge as compensation. In forex, the ‘carry interest’ is only charged for positions held overnight. Most brokers and traders refer to it as overnight swap.
Normally, a day closes at 5 PM North America Eastern Time. Therefore, if a trade is entered during the day and goes past the 5 PM, it accrues a carry interest or swap. But if the trade is closed before 5 PM, it is not eligible for the ‘carry interest’.
Normally, the ‘carry interest’ charged on currency pairs differs from one currency pair to another. The interest depends on the prevailing interest rate of each currency. It could be charged on the sold currency or paid on the purchased currency. For example, in EURUSD the EUR is the purchased currency while the USD is the sold currency.
The swap is also different for long and short positions.
It is therefore very important to understand the ‘carry interest’ or swap that a currency pair would accrue in case you want to place a long term trade or a trade that will at least run for more than one business day.
There are a number of indicators designed to help traders understand the swaps on every currency pair they wish to place a trade on. The best of the carry interest indicators is the ‘swap indicator’.
The swap indicator
Swap indicator is a comprehensive carry interest indicator that displays the swaps or carry interests of all the carry pairs that your forex broker offers right on your trading chat. By using the swap indicator, you do not have to go through the long and tedious process of checking the swap that you would expect on every currency pair you trade. Everything is made easy and you can see the swap at a glance on your chart.
This helps in making decisions.
Getting the indicator on your MT4 Trading chart
1. Download the indicator
Swap indicator does not come with your MT4 trading platform. Therefore, you will have to download the ex4-file on to your computer.
Make sure you save the file in the indicator folder of the MT4 application.
To locate the indicator folder, go to the location of the MT4 folder and open it. Then open the MQL4 folder and you will see the indicator folder inside. Open the folder and save the ex4-file inside.
2. Restart your MT4 platform
Once you download and save the indicator, you will need to restart your MT4 platform so that it can load the indicator to its indicator list.
3. Load the indicator on the trading chart
First, you will have to locate the indicator.
Go to the navigator section on the left-hand side of your MT4 platform just below the market watch symbols. Click on the plus (+) next to the indicators to expand the indicator list.
Expand the indicator list
Then, scroll down till you locate the ‘swap indicator’.
Locating the Swap indicator
Double-click on the swap indicator so that you can configure it before loading it on the screen. Another option would be to drag and drop it on the chart where it would appear in its default format.
Configuring the indicator
You can change the value column depending on how you would like the indicator to appear on the screen. In most cases, you would need to change the colors depending on the background that you use for your trading chart. If all the values are okay, you can click ‘OK’ and the indicator will be displayed on the chat window.
How the swap indicator appears on the chart window
How to use the swap indicator to trade
The Swap Indicator displays the swaps of all currency pairs. It gives the swaps for long positions (buy orders) and also for short positions (sell orders). By default, the indicator displays the currency pairs in three columns so that they can all fit on the chart.
The swaps for the long positions are displayed in the first row (gray and silver in color) while the swaps for the short positions are displayed in the second column (tomato and dark orange color).
The swaps are given in points and can either be negative or positive depending on the currency pair and type of trade.
As a trader, when you are opening long term positions, you should always aim to open trades or positions with currency pairs that would give you positive swaps. You should keep in mind that the swaps are converted into pips then into money and directly subtracted from your profits or added to your loss (in case of a losing trade).
Positive and negative swaps affect your overall income
Advantages of trading with positive swaps
1. It adds to your profits
Let’s say you profit is $2.15 and your swap is 0.21. When the position is closed, the total amount of money that will be added to your account is $2.36, which is $2.15+$0.21.
Therefore, the larger the positive swap, the more the profits.
2. It also helps in reducing your losses
In case a position turns to losses, a positive swap will cancel out some of the loss and reduce the amount of money that you lose.
For example, if a trade has a loss of $-1.34 and a swap of 0.21. If the position is closed, you will only lose $1.13.
3. You can hold the trade as long as you want
With a positive swap, you can hold a trade for as long as you want since the swap adds to your account instead of eating into it.
Who is the swap indicator for?
The swap indicator is best suited for the long term traders. if you want to place a trade that will run for more than one business day then this indicator could be of great importance.
For the day traders, the ‘swap indicator’ is not very important since they don’t have to worry about swaps since their trades do not accrue any swaps.