What Is a Swap in Forex? Rollover and Overnight Fees Explained

Why swaps exist

Spot currency trades normally settle two business days after the trade. Retail rolling spot and CFD positions are not settled by delivering currency — instead, open positions are rolled over to the next day at the broker’s daily cut-off, often around 5:00 pm New York time. Holding a currency position overnight economically resembles borrowing one currency and depositing the other, and the swap reflects the net financing cost or benefit of that position. In a retail CFD account this borrowing and deposit do not literally take place; the broker applies the charge or credit to the account.

Interest differentials and swap direction

The starting point is the interest-rate differential between the two currencies. It creates a tendency for the side holding the higher-yielding currency to receive a credit and the other side to pay — sometimes described as positive or negative carry. The swap you actually see, however, is shaped by several things:

• Market pricing: the cost of rolling a position over is set in the interbank market through tom-next rates and forward points, which reflect short-term market interest rates rather than central bank policy rates directly.
• Broker adjustments: brokers add their own markup or spread to the market rate, and this can differ between the long and short side.
• Market conditions: funding conditions, holidays and month- or year-end effects can move forward points.

So a 4-percentage-point gap between two central bank rates does not mean a swap of about 4% a year. The credit on the higher-yielding side can be much smaller than the differential, and after broker adjustments both sides can be negative. The only reliable figure is the swap rate your broker publishes for your account.

How is forex swap calculated?

Depending on the broker and platform, swaps are quoted in points per lot, in money per lot per night, or as an annual percentage of the position’s value. The broker’s published rate is multiplied by your position size and the number of nights held.

Converting a swap quoted in points

Swap on long EUR/USD: −6.5 points per lot. On MetaTrader, for a standard five-decimal EUR/USD quote, a point is a pipette (0.00001), so −6.5 points = −0.65 pips. (On other symbols a point can be a different size.)

Pip value on 1 standard lot of EUR/USD on a USD account = $10 → swap = −0.65 × $10 = −$6.50 per night.

Held for two full weeks: 10 weekday rollovers, two of them triple-swap days, so 8 × 1 + 2 × 3 = 14 swap days → 14 × −$6.50 = −$91, excluding holidays and any change in the swap rate.

For very short holds, swaps are often smaller than the spread or commission. For large positions, pairs with wide interest differentials or trades held for weeks or months, they can become significant and may decide whether a trade was profitable.

What is triple swap?

For many FX pairs, brokers charge or pay three days of swap on one weekday, commonly Wednesday. The reason is settlement: spot FX normally settles two business days after the trade, so the position rolled over on Wednesday settles across the weekend. CFDs on other instruments, such as indices or commodities, may follow different conventions, and holidays can move the triple-swap day — check your broker’s schedule.

What is a swap-free forex account?

A swap-free account is designed to avoid overnight interest charges or credits. Such accounts are sometimes called Islamic accounts. Instead of swaps, brokers may charge a fixed administration fee, wider spreads or other fees, often after a position has been open for a number of days. Terms vary by broker, so a swap-free account is not automatically cheaper.