Forex Swap Rates and Rollover Guide
Swap rates (also called rollover or overnight funding) are interest payments credited or debited to forex traders holding positions past the daily rollover time. They represent the cost or gain of holding a position overnight.
When a trader holds a position past 5:00 PM Eastern Time (market close), the broker adjusts the account by the interest rate differential between the two currencies in the pair, plus or minus a broker markup. If you buy a currency with a higher interest rate and sell one with a lower rate, you earn a positive swap. If the opposite, you pay a negative swap. Swap rates are expressed in pips per lot per day and vary by pair and broker.
Swap rates triple on Wednesday nights (triple swap Wednesday) to account for the weekend settlement period when markets are closed. For traders holding positions for weeks or months, swap costs or credits can significantly affect overall profitability. Carry traders actively seek positive swap pairs, while short-term scalpers and day traders avoid holding overnight to eliminate swap exposure altogether.
Swap Calculation and Transparency
Brokers publish swap rates on their platforms. The rate is based on the interbank overnight rate for each currency plus the broker's margin. Islamic (swap-free) accounts are available for traders who cannot receive or pay interest due to religious reasons, though some brokers charge administrative fees instead. Check your broker's swap policy before opening longer-term trades.
FAQs
When is the best time to close a trade to avoid swap?
Close before the 5:00 PM ET rollover if you want to avoid overnight swap charges. Day traders typically close all positions by then.
Can I make a living from swap credits?
Positive swap alone rarely generates enough income to live on unless trading very large position sizes, which carries significant currency risk. Swap is a supplement, not a primary income source.
Do swap rates change?
Yes, swap rates change with central bank interest rate decisions and broker adjustments. Monitor them regularly if holding trades long-term.