<P> It is also common to trade "forward - forward" where both transactions are for (different) forward dates . </P> <P> The most common use of foreign exchange swaps is for institutions to fund their foreign exchange balances . </P> <P> Once a foreign exchange transaction settles, the holder is left with a positive (or "long") position in one currency and a negative (or "short") position in another . In order to collect or pay any overnight interest due on these foreign balances, at the end of every day institutions will close out any foreign balances and re-institute them for the following day . To do this they typically use "tom - next" swaps, buying (or selling) a foreign amount settling tomorrow, and then doing the opposite, selling (or buying) it back settling the day after . </P> <P> The interest collected or paid every night is referred to as the cost of carry . As currency traders know roughly how much holding a currency position will make or cost on a daily basis, specific trades are put on based on this; these are referred to as carry trades . </P>

What is swap long and swap short in forex
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