Crypto: HODL positions without paying swaps

With costs and instrument range top of mind in the decision-making process, brokers who offer some form of cryptocurrency trading while allowing traders to hold their positions overnight without paying any fees have a big advantage over the competition. Even though they remain largely unregulated, risky, and unstable, cryptos have not lost their popularity in trading circles. Especially in emerging African and Asian economies like Nigeria and Vietnam, to name just two, interest in cryptocurrency is noticeably high.

This article will delve into the advantages of holding cryptocurrency positions without paying swaps.

What’s the deal with swaps?

Spreads, commissions, inactivity fees and those dreaded withdrawal fees. These are the most common ways a broker makes money from you. They’re usually the first (and, misguidedly, sometimes the last) stop a trader makes when considering a broker. Swaps can often fall by the wayside, but if you’re not a day trader who mostly opens and closes positions within a single trading cycle, you overlook them at your own peril.

Most responsible brokers will offer what are called Islamic accounts, also known as swap-free accounts. These types of trading accounts are designed for Muslim traders who wish to comply with Sharia law, which prohibits the charging or paying of interest like swap fees. Islamic accounts operate on the principle of profit and loss sharing, where the broker shares the profits earned from trades with the trader, rather than charging interest on positions held overnight.

For non-Muslim swing and position traders, positive and negative swap fees could become a massive sticking point to their bottom line. These fees can add up over time, sometimes in the hundreds of dollars, depending on the number of open positions, their size, and the length of time they’re held. So, to get ahead of the pack, what some brokers have started to offer is swap-free accounts or programs for non-Muslims. And it’s exactly what it sounds like: with these accounts you get to hold your positions overnight, for as long as you want, without needing to pay any sort of interest charges, regardless of whether you’re Muslim or not. Exness, one of the world’s leading multi-asset brokers, is one of these companies. They currently provide two types of swap-free trading accounts; those offered to Islamic regions and those offered to non-Islamic regions.

Trading the price vs. owning the crypto    

As popular as cryptocurrency trading is around the world, directly buying and owning cryptocurrencies can be complicated and, in some countries, completely inaccessible. That’s why a lot of traders around the world opt for the more flexible option: speculating on the price movements of cryptocurrencies (a.k.a. trading crypto CFDs). Not only does trading cryptocurrency prices provide more control over trading strategies (for example, using technical analysis to identify trading opportunities, or setting stop-loss and take-profit orders to manage risk and protect profits) but you can use leverage with crypto CFDs which isn’t available when directly investing in cryptos. Of course, it’s important to understand the risks that come with leverage, and how losses can be magnified as well as profits, but a lot of risk-tolerant traders love the idea of opening larger positions with less capital.

Perhaps the biggest advantage of trading crypto CFDs, over buying and owning cryptocurrencies, is the possibility of taking advantage of both rising and falling prices. When you buy and own cryptocurrencies, you can only ever profit if their prices go up. With crypto CFDs, however, you could potentially profit from falling prices by selling short, which can provide more trading opportunities. And when it comes to such a volatile asset like a cryptocurrency, which tends to drop in price as much as spike up, this feature cannot be ignored.

The bottom line with swap-free crypto trading

The attraction of trading the price of cryptos is obvious, but here’s why it’s so important in the context of overnight fees. When you buy and own cryptocurrencies, you take direct ownership of the digital assets, and there is no rollover or swap fee associated with holding the position. When you trade crypto CFDs, holding your positions overnight incurs swap fees just as much as if you were holding a EURUSD position.

So, it’s no wonder that brokers who offer accounts with no swap fees on crypto CFD positions are an eye-catching option for traders. Especially those who reside in non-Muslim countries that have restrictive foreign exchange policies and have a massive cryptocurrency community, like Vietnam.

Traders should stay vigilant and look out for all other ways a broker will charge them a fee. Accounts that promote swap-free options sometimes come with “no swap fees”, fixed fees that you pay for not having overnight charges on open positions. These are the kinds of tradeoffs that traders are constantly weighing in their heads when choosing a broker, but there’s no doubt that the offer of holding overnight crypto CFD positions without an accrued interest charge is one that many will find attractive.