'Swap-free'brokers used to mean hidden fees, but that is no longer the case. If the brokerhas access to top-tier liquidity and market leading pricing, lack of swaps forthem can result in an alluring combination for traders. This can make thecompany much more popular, and, in the end, profitable. That is the approach wehave taken with Defcofx, and we see other brokers now following suit. Thisopens up new innovative strategies to traders, as well as cost-savingopportunities for those paying attention. Some of the more profitable modernstrategies require no-swap accounts to be effective. We decided to discuss themtoday.

The industry isincreasingly moving into two opposite directions: short-term scalping withprograms, EAs, and long-term 'holding', for either shorts or longs, to exploitfundamental trends. We have explored the rise in EA usage already, so in thisopinion piece, we talk about the other side of this story. The rise of trueno-swap trading, and why offering this one feature will become a necessity inthe future.

Understanding Swap Fees

Swap fees, also known as 'rollover fees', are charges incurred when atrader holds a position overnight. These fees happen due to different interestrates between two currencies in a trading pair (plus, some markup from thebroker, of course). Basically everything that is not day trading or scalpingwill involve a swap fee at some point.

Swap fees may be positive, allowing for a carry-trade strategy, wheretraders (famously, even Japanese housewives) earn money from the currencieswith higher interest rates. But more often than not, they are negative,resulting in a net loss to a trader. For those employing long-term strategies,these fees can accumulate, significantly impacting overall profitability.

Brokers began offering no-swap accounts in the early 2000s. They werecreated primarily to accommodate traders who follow Islamic finance principles,which prohibit paying any interest (Riba). Swap-free accounts were the onlyones compliant with Sharia law. Over time, however, these accounts gained inpopularity, and regular traders started requesting access to them as well.

No-swap accounts are not just a novelty anymore. These are becomingmore and more popular, at a rapid rate. It's to the point where some brokers,like Defcofx, made allof our accounts entirely swap-free, with no additional charge to thecustomer.

Being swap-free is not profitable to the broker, which gets to chargeone less fee. It's profitable only to the trader. And that is why some brokersslightly increase their spreads for the Islamic accounts. Some call it an'admin fee' and apply it as an alternative to the swaps. Some provide swap-freefor a week, a month or even three months but then suddenly start charging thefee. Some may even start charging 'inactivity fees', if you don't trade for amonth. That is why finding brokers that have no swaps, inactivity fees, orother 'additional' fees of any kind, is quite difficult still.

Defcofxis one of true non-swap brokers — with no inactivity, deposit, or withdrawalfees, no 'admin fee', and top-tier spreads from 0.3 pips on raw accounts.Charging no swaps from traders doesn't impede us from offering leverage up to1:2000 or providing 40% welcome bonuses. It means, of course, we earn fewerfees from each individual trader, but we attract more traders overall byoffering favorable trading conditions, so it pretty much balances out in theend. That is the fee structure we encourage every other broker to try.

Our Top Trading Strategies with No-Swap Accounts

1. Long-Term Position Trading

This involves holding trades for extended periods, ranging from weeksto months. Traders analyze fundamental factors such as economic indicators andmonetary policies to predict currency, gold, oil, or stock movements. No-swapaccounts are particularly beneficial here, as they eliminate the overnight feesthat would otherwise erode most profits over time.

2. Swing Trading

Swing trading focuses on capturing short- to medium-term gains overseveral days or weeks. Traders analyze market trends and technical indicatorsto enter and exit positions when they think an asset is oversold/overbought, orcan experience a significant trend in either direction. Utilizing a no-swapaccount enables swing traders to hold positions overnight without worryingabout accumulating swap fees, thus preserving their profit margins.

3. Close of the day trading

Some traders open positions just before the close of the day. This timeis typically characterized by increased volatility as traders finalize theirpositions. It includes last-minute order executions, price fluctuations, andsettlement adjustments. However, it is much harder to maintain profitabilitywith close of the day trading if you hold some trades over night, and swap feesare involved.

At Defcofx we welcome clients from allaround the world, without any restrictions, and some of them trade near thetime of New York session closure. We have NY4 and LD5 data centers in New Yorkand London specifically designed to accommodate traders from distant countrieswith high ping. However, with high swap fees, this setup may have limitedimpact. Having zero swaps allows us to make it fair to all traders, regardlessof trading style.

No-Swap Brokers Are the Futureof the Industry

There are at leastfour reasons we see it this way. Defcofx is committed to having no swaps leviedat its traders, and we see it as a necessity in the modern trading environment.Not to us, but to any traders thinking about choosing a broker, or trying outforex trading for the very first time.

Modern swap-free brokers are becoming hard to beat because of:

1. Ease of use

Traders are increasingly impatient; the modern world offers plenty ofdistractions. Calculating swap fees is tedious and laborious for both regularretail trading, and for programming robots, as it is an extra variable thatneeds to be accounted for. Removing swaps simplifies the process, and, forsome, tremendously helps the ease of use.

2. Cost-efficiency

By eliminating swap fees, no-swap brokers can offer a cost-effectivesolution for traders, especially those employing strategies that requireholding positions overnight or longer. This reduction in trading costs enhancesoverall profitability and attracts a broader range of traders.

3. Flexibility

No-swap accounts cater to traders who, due to religious beliefs orpersonal preferences, seek to avoid interest-based transactions. Thisinclusivity drastically broadens the broker's client base and promotes a morediverse trading community.

4. Alignment with long-termtrading trends

As more tradersadopt long-term strategies (positional trading, or even so-called 'hodling'),the demand for no-swap accounts is expected to rise. Brokers offering suchaccounts, we believe, position themselves at the forefront of this trend,meeting the evolving needs of the trading community.

The advent of trueno-swap brokers marks a significant shift in the industry — showing tradersthey can get access to enhanced strategies and cost-saving opportunities for noextra price. By accommodating long-term positions and diverse trading approacheswithout the burden of any fees, no-swap brokers are not only able to meetcurrent market demands, but are also shaping the future trajectory of the forexmarket as a whole.

Disclaimer: Article submitted by Defcofx broker team