Funding Charges

Passive Fees: What Are Passive Fees?

Passive fees, also known as dormant or inactivity fees, are charges applied to trading accounts that have little or no trading activity over a specified period. These fees are intended to help brokers manage administrative expenses associated with maintaining inactive accounts.

Key Points:

  1. Purpose: The primary goal of passive fees is to cover the costs of account maintenance and administration for accounts that do not engage in trading activities.
  2. Calculation: Passive fees are typically calculated as a percentage of the account balance. The fee continues to be deducted from the account until the balance reaches zero or until the account is reactivated through trading activity.
  3. Maximum Charge: Many brokers impose a maximum charge on passive fees, commonly capped at around $100, to limit the financial impact on account holders.
  4. Impact on Traders: Traders should be aware of these fees, as they can erode account balances over time, especially if an account is left dormant for an extended period.

Exchange / SWAP

In forex trading, the difference in interest rates between two currencies in a currency pair is commonly referred to as a rollover, overnight interest, or swap. Here’s a detailed breakdown:

  1. What is a Swap? A swap is the interest paid or received for holding a position overnight. It is calculated based on the notional value of the position and the difference in interest rates between the two currencies involved.
  2. Positive Swap: When you purchase a currency with a higher interest rate than the one you are selling, you may earn a positive swap or interest credit. This is essentially a payment from the trading platform for keeping the position open overnight.
  3. Negative Swap: Conversely, if the currency you bought has a lower interest rate than the one you sold, you will incur a negative swap or interest charge. This means you are effectively being charged for holding the position overnight.
  4. Calculation: Swaps are calculated using the notional value of the trade and the interest rate differential. The formula generally looks like this: Swap=Notional Value × Interest Rate Differential × Days Held\text {Swap} = \text {Notional Value} \times \text {Interest Rate Differential} \times \text {Days Held} Swap=Notional Value × Interest Rate Differential × Days Held.
  5. Market Conditions: It’s important to note that swaps are influenced by market conditions and fluctuations in interest rates set by central banks. As these rates change, so do the swap values.
  6. Currency Basis: Swaps can differ based on the currency pair being traded, as each pair has its own interest rate differential. Traders should always check the specific swap rates for their chosen currency pairs on their trading platform.