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Swap Markets in Forex Trading: An Academic Overview

4 min read

Forex swap markets allow traders to exchange currencies, making money off the difference in value between the two currencies. By entering into a swap agreement, a trader can gain more exposure to a particular currency or hedge against potential losses. Swaps are often used by institutional investors to speculate on long-term currency movements or to hedge their portfolios against currency risk. Currency traders can also use swaps to speculate on short-term movements, such as day-to-day or even intra-day moves. With the many different strategies available, traders have the ability to make a variety of profits, while at the same time taking on controlled levels of risk.