Swap (rollover)

A swap (rollover) is a charge or credit for holding a position overnight. It depends on the interest-rate gap between the two currencies and the broker's terms.

How it works

When you hold a trade overnight, you are in effect borrowing one currency and holding the other. If the rate on the currency you bought is higher than on the one you sold, the swap can be positive. If it is lower, you pay. The broker adds its own markup, so the swap is often negative on both sides.

The swap is applied once per trading day when the position rolls over, usually around 5 pm New York time. For most currency pairs the Wednesday-to-Thursday rollover is charged triple to cover the weekend. The swap is calculated on the full position size, not on your margin, so leverage makes it much bigger.

For scalping and day trading the swap barely matters. For swing trades and long-term positions it can eat a real share of the profit. The swap for each instrument is listed in the broker's contract specification.

Example with numbers 1

Say the broker's long swap on EUR/USD is −6 USD per lot per day. You hold 1 lot for a week: 5 rollovers with Wednesday tripled, so 7 charges. 7 × 6 = 42 USD in costs, even if the price did not move.

Example with numbers 2

The other way round: you buy a high-rate currency against a low-rate one. If the swap is +3 USD per lot per day, 2 lots held for 30 days earn about 3 × 2 × 30 = 180 USD. But one bad price move can easily wipe out that income.

Common mistake

Beginners open a long-term position without checking the swap, then wonder why the profit melts away on its own. Before a trade lasting several days, open the instrument's specification and calculate the swap for the whole period. And do not build a strategy only on a positive swap: rates change, and price can move against you far more than the swap pays.

Questions and answers

What is a swap in forex in simple terms?

It is a daily fee or credit for keeping a position open overnight. It comes from the difference in interest rates between the two currencies in the pair.

Why is there a triple swap on Wednesday?

Forex trades settle two business days later. A position rolled from Wednesday to Thursday settles over the weekend, so it is charged for three days. Some instruments, such as index CFDs, may use a different triple day.

Can I trade without paying swaps?

Yes, if you close positions before the rollover. There are also swap-free accounts (often called Islamic accounts), but the broker usually charges a different holding fee instead.

Swap (rollover)

How it works

Questions and answers

Related terms

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