What is swap in forex?

Swap is the interest you pay or earn for keeping a forex position open past your broker's daily cutoff, usually 5 p.m. New York time. It's also called a rollover fee or overnight fee. Whether you pay or earn depends on the interest rates of the two currencies in the pair, which side you're on, and your broker's markup.

Swap is small per night and easy to ignore. Over a swing trade, and especially over a Wednesday, it can be the difference between a winning trade and a losing one. Below: where it comes from, when it's charged, how to calculate it from the numbers in MetaTrader, and how to see what it has cost you so far.

Why swap exists

Every forex trade is two currencies at once. Buy GBP/USD and you're holding pounds and owing dollars. Each currency pays its own interest rate, so overnight you earn the rate on the one you hold and pay the rate on the one you owe.

• You hold the higher-rate currency — the difference can be in your favor
• You hold the lower-rate currency — you pay the difference
• The broker adds a markup on both sides — which is why many pairs show a negative swap whether you buy or sell

So a swap is not a penalty for holding overnight. It's the interest difference, passed through your broker, with their margin on top.

When swap is charged

Swap is charged once per rollover, at the broker's daily cutoff. Most brokers use 5 p.m. New York time; your broker's specification or terms give the exact time.

Only one thing matters: is your position open at that moment? How long you held the trade doesn't.

• Opened at 9 a.m., closed at 4 p.m. New York time — no swap
• Opened at 4:30 p.m., closed at 5:30 p.m. — one night of swap, after one hour in the trade
• Held from Monday morning to Friday morning — four rollovers, charged as six nights (see Wednesday below)

If your MetaTrader clock isn't your local clock, this guide to forex session times shows where 5 p.m. New York falls for you.

Why Wednesday is charged three times

Spot forex settles two business days after the trade. A position rolled over on Wednesday moves its settlement from Friday to the following Monday, across the weekend, so it carries three days of interest. That's why most brokers charge triple swap on Wednesday for currency pairs.

Two exceptions to check in your own platform:

• Other instruments — some brokers charge the triple swap for indices, energies or crypto on Friday instead
• Holidays — a rollover that spans a bank holiday can carry extra days

How swap is calculated

MetaTrader lists each pair's swap rate in points per lot, per night. On a five-digit pair like GBP/USD, 1 pip = 10 points. To turn the rate into money:

Then multiply by the number of nights, counting Wednesday as three.

A worked example (the sample trade in the screenshot below, with a sample swap rate):

To find your pair's rate in MetaTrader, right-click it in Market Watch and open Specification. It lists the swap for buying and for selling, and usually the day the triple swap is charged. Rates change with interest rates, so check them rather than relying on a number you saw once.

Positive swap and the carry trade

If you hold the higher-rate currency and the difference is larger than your broker's markup, swap is credited to you each night. Holding a position mainly to collect that is called a carry trade.

Two things to keep in mind. Rates change, so a positive swap can turn negative. And the nightly credit is usually small next to how far the price can move against you, so the trade still has to work on price. Your platform's specification shows whether a pair currently pays or charges on each side.

Swap-free accounts

Some brokers offer swap-free accounts, often called Islamic accounts, where no overnight interest is charged or paid. They usually come with their own conditions, such as a fixed fee after a set number of nights or different spreads. Read your broker's terms before assuming a swap-free account costs less.

What has swap cost you so far?

The calculation tells you what one trade will cost per night. It doesn't tell you what swap has done to your results. For that, you need your actual trades.

In MetaTrader, the History tab shows a Swap column for each closed position. Add it up and compare it with what your trades made before costs. If you hold trades for days, the total is often bigger than you'd guess.

The sample trade above is a good example: it won 2.2 pips, and after $3.50 in commission and $9.60 in swap, it lost $2.10.

A forex trading journal keeps that column for you. In TradeBB, every trade shows its swap next to its commission and its net result, each day in your journal shows the day's total swap, and every report counts results after swap. Filter to multiday trades and you can see whether the trades you hold overnight still pay once the nights are counted.