What's Swap in Gold Trading?

In XAUUSD, there is the payment of swaps every day: this is the interest rate of a gold that gold earns per day. This interest for gold 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 of an interest payment which is an Issue in the Islamic Religion. Islamic Religion does not allow paying & getting paid of interest, for Islamic traders there's a account designed in accordance with their Values: Referred to as Swap Free.

For this trading account a trader will not pay the overnight rollover interest on any trade and also will 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 trading Islamic trading broker and select the option of "Islamic Account", This option is provided under the Accounts Section of the broker specifying instructions of opening one of these accounts.

Once one opens a this trading account, then Gold rollover interest is removed. Once this no paying & being paid of interest is set, if a trader is using a platform such as the 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 gold for which a swap is to be applied. As a trader if you don't want to pay this roll over you should close your transactions before the end of the trading day, that way you will not pay the rollover fee as you're no longer holding open trade. Because the market doesn't open on Saturday and Sunday, the rollover for these two day will be charged on Wednesdays, meaning on Wednesday one will pay the roll-over for Wednesday, Saturday & Sunday, and 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 Trades. Day Traders rarely leave their trade transations opened overnight & close them all before the end of the day. Swing Traders on the other hand may 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 xauusd trading broker and opens and 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 Meta Trader 4 Software like all the other traders, the trader can trade currencies, all stock indices, all CFDs, all metals & all other Financial Instruments provided by the trading Islamic broker.

However, be careful in choosing 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 is not supposed to happen as the trader will still be paying for the interest even though is disguised as another charge, good gold trading Brokers do not add any commission nor do they add any charge onto 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 trading Islamic broker it is good to check for any additional terms of trading for the Islamic Account that you are going to be opening to make sure that the broker you select is really a no swap broker.

Islamic Gold Account

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