Swap
Also called Rollover, Overnight fee, Swap fee, Swap rate, Overnight financing, Rollover interest
Swap (also called rollover) is the overnight interest your broker credits or charges for holding a leveraged position past the daily cut-off. It comes from the difference between the interest rates of the two currencies in the pair, minus your broker's markup.
Swap never appears on the chart, so a trade that is right on direction can still lose money if you hold it long enough against a negative swap. It is charged on the full position value, not on the margin you put up, so a small yearly rate becomes a real cost to your account.
Why a held trade earns or pays swap
When you trade a currency pair with leverage, you are in effect borrowing one currency to hold the other. Each currency has its own interest rate.
If the currency you bought has the higher rate, the swap can be positive and you receive a small credit. If it has the lower rate, the swap is negative and you pay.
The markup is why the two sides are not mirror images. A pair can pay a little on the long side and charge more on the short side. It is also common for both sides to be negative.
The drawing below uses illustrative rates, not real ones. The gap between the two rates is the same size in both directions, but the markup is taken off both results.
Swap is applied once per day at the broker's cut-off, around the end of the New York session. A trade opened and closed before that moment pays no swap, however large it is.
What one week of negative swap costs in pips
The figures here are an illustrative example, not real broker rates. A standard lot is 100,000 units of the first currency; a USD-quoted pair such as EUR/USD has the dollar second, so one pip on one standard lot is worth $10. You buy 0.50 lots of a USD-quoted pair on Monday before the cut-off and close it the following Monday before the cut-off. The long swap is minus $6 per standard lot per night.
Markets close at the weekend, but interest still runs. Brokers charge the two weekend nights on one weekday instead, known as the triple swap day. For forex this is often Wednesday. Behind the scenes, a forex trade settles (is completed) two business days after you open it. Hold past Wednesday's cut-off and that completion date jumps from Friday to Monday, so you pay interest for Saturday and Sunday too. The strip below shows that jump.
Now add up the week and turn the total into pips, so you can compare it with your target and stop.
The week costs 4.2 pips before spread and commission. On a 20-pip target, that is roughly a fifth of the trade. On a 300-pip swing target it barely matters.
Finding the swap rate on your trading platform
Every instrument has a specification or contract details page. Look for three lines: swap long, swap short, and the triple swap day.
Check the unit before you read the number. Brokers quote swap in one of three units.
A point is the smallest price step. On a five-decimal USD-quoted pair, one point on one standard lot is 100,000 × 0.00001 = $1. So a swap of minus 6 points is the minus $6 per lot used above.
The table turns each unit into money per night on the same illustrative 0.50 lot position. For the yearly percentage row, the pair is priced at 1.2000, so the position is worth 50,000 × 1.2000 = $60,000, against an illustrative $600 of margin at 1:100 leverage.
| Unit quoted | What the number means | Money per night on 0.50 lots |
|---|---|---|
| Points (−6) | Price steps charged per night | 6 × $1 × 0.50 = $3 charged |
| Account money per lot (−$6) | Dollars per standard lot per night | $6 × 0.50 = $3 charged |
| Yearly percentage (−1.8%) | Annual interest on the full position value | $60,000 × 1.8% ÷ 360 = $3 charged |
For the percentage unit, check whether your broker divides the year by 360 or 365 days.
Once a trade is open, swap builds up in its own column beside the position. In your account history it is listed separately from the price profit and the commission.
A common misread is judging a trade by its price profit alone. Add the three columns together to get the real result.
How far one adverse move cancels positive swap
Holding a trade mainly to collect positive swap is called a carry trade. Run this check with the article's illustrative numbers before you hold a trade for its swap credit: at a $3 nightly credit on 0.50 lots ($5 a pip), a 30-pip adverse move costs 30 × $5 = $150, which wipes out $150 ÷ $3 = 50 nights of swap. The rate can also turn negative while you hold.
Checks before you hold a position overnight
- Read both sides. Never assume the short side pays because the long side charges.
- Apply the one-tenth rule. Work out the swap for your planned hold in pips, including the triple swap night if you cross it. If it is more than a tenth of your target, shorten the hold, cut the size or skip the trade. In the example above, 4.2 pips is 21% of a 20-pip target, so the rule says shorten the hold or skip the trade.
- Re-check the rate. Swap changes when central banks move rates or when the broker updates its markup.
- Ask about swap-free accounts. They remove the interest, but some replace it with a fixed fee after a set number of nights.
FAQ
Do I pay swap on gold?
Yes, if you hold a leveraged gold position past the cut-off. The rate is still the gap between two rates, the gold lending rate and the US dollar rate, with the broker's markup taken off. The triple swap day for gold may differ from the forex one, so read the specification.
What is swap in crypto trading?
On leveraged crypto contracts at a broker, it is the same overnight financing charge, and it may apply at the weekend too because crypto trades all week. Perpetual contracts on crypto exchanges charge a funding payment instead of a nightly swap.
Do I pay swap on both trades if I hedge a buy and a sell on the same pair?
Usually yes. Each position gets its own swap at each cut-off, and the long and short rates are rarely equal. So a fully hedged pair often pays swap every night while its price profit stays locked at zero.