Swap free

Swap free does not mean cost free. A broker that stops charging swap usually recovers the money somewhere else, so you need to find where the cost moved before you rely on it.

What swap free changes on a trade you hold overnight

The daily rollover is the moment, once a day at the broker's set server time, when open positions are carried to the next day and swap is booked. A swap is the interest adjustment applied to an open position at each daily rollover. It can be a debit or a credit, depending on the pair and the direction of your trade.

Whether swap is a debit or a credit depends on interest rates. Each currency in a pair has its own interest rate, and an open position means you hold one currency and owe the other. If the currency you hold earns a higher rate than the one you owe, your side can receive a credit. If it earns less, you pay a debit. This is why buying and selling the same pair give you different swaps.

How the interest rate gap decides swap credit or swap debit, and what swap free removes

The condition began as a way to trade without interest, which Islamic finance does not permit. That is why a swap-free account is also called an Islamic account.

In place of swap, a broker may use one or more of these:

• a fixed administration fee per lot per night, often starting after a set number of free nights (a grace period);
• a wider spread on the swap-free account;
• a higher commission per trade.

Worked example: 10 nights with and without swap

The figures here are an illustrative example, not real broker rates. You buy 1 standard lot (100,000 units) of EUR/USD and hold it for 10 nights.

On a standard account the long swap is a debit of $7 per night. The example counts one swap per night for simplicity. On the swap-free version there is no swap, the first 3 nights are free, and after that the broker charges a $5 administration fee per night.

Holding cost of 1 lot for 10 nights: standard swap vs swap free

Swap on the standard account10 × $7= $70

Chargeable nights when swap free10 − 3= 7

Administration fee when swap free7 × $5= $35

Difference$70 − $35= $35

Saved by swap free on this trade$35

One pip on 1 standard lot of a USD-quoted pair is worth $10, so the $70 swap equals 7 pips of price movement. The swap-free fee equals 3.5 pips.

Now reverse the trade. Suppose selling the same pair pays a swap credit of $3 per night. On the standard account you collect 10 × $3 = $30. Swap free, you collect nothing and still pay the $35 fee. The gap is $30 + $35 = $65, so swap free leaves you $65 worse off.

10-night result by account type: long and short side, standard swap vs swap free

Where the swap-free status shows on your trading platform

A common misread is seeing 0.00 in the swap column and assuming the trade cost nothing to hold. If your balance changed by less than the profit shown on the closed trade, look for the fee in the history.

You can confirm the status, and find the fee, in three places:

• Contract specification: swap long and swap short read zero or disabled.
• Open positions list: the swap column stays at 0.00 after rollover.
• Account history: the replacement fee shows as a balance line or inside the commission column.

Where swap-free status shows on a trading platform: contract specification, open positions and account history

Swap free is set on the account by the broker, not in the order window. You normally request it in the broker's client area or choose it when you open the account.

Checks before you trade swap free

Copy this formula and fill in your broker's own figures:

Swap-free cost = extra spread or commission + (nights held − free nights) × fee per lot × lots

If nights held is fewer than free nights, the fee part is zero. To turn extra spread into money, use extra pips × pip value per lot × lots.

Then compare it with the swap you would pay on the standard account for the same trade.

• If you close every trade before rollover, swap free changes nothing. Pick the account with the lower spread and commission.
• If you hold for days on the side that pays negative swap, swap free can cost less. Run the formula first.
• If the standard account charges you but you always close before your free nights run out, the fee never starts. Swap free then costs you nothing beyond any extra spread or commission.
• If the standard account pays you swap on your side, stay on the standard account.
• Ask how many free nights you get and whether the count restarts when you close and reopen a position.
• Standard accounts charge three nights of swap on one rollover each week to cover the weekend. Ask whether the administration fee is tripled the same way.
• On a prop firm account, check whether swap free is included or sold as an add-on, and whether it changes any holding rules.

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