A swap (also called a rollover fee) is the interest charged or credited when you hold a forex position overnight. It reflects the interest rate difference between the two currencies in a pair. Swaps can either cost you money or earn you money, depending on the direction of your trade and the relative interest rates of the currencies involved.
How Swaps Work
Forex trades involve borrowing one currency to buy another. When you hold a position overnight, you’re effectively borrowing one currency and lending the other. The interest rate difference between these two currencies determines whether you pay or receive a swap.
Example
- You buy AUD/JPY (buying Australian dollars, selling Japanese yen)
- Australia’s interest rate: 4.35%
- Japan’s interest rate: 0.25%
- You earn the difference on the amount you hold
If you sell AUD/JPY (selling higher rate, buying lower rate), you pay the swap.
In practice, brokers don’t pass through the full interest rate differential. They take a markup, which means swap charges are usually higher than swap credits.
Swap Calculation
The simplified formula:
Daily Swap = (Interest Rate Differential × Position Size) / 365
Real swap values are set by your broker and can be found in your trading platform under the instrument’s specifications. They’re quoted as either a pip value or a dollar amount per lot per day.
Triple Swap Day
Due to the T+2 settlement convention in forex, one day each week carries a triple swap charge to account for the weekend. Most brokers apply this on Wednesday night. A swap that normally costs $8 per night will cost $24 on Wednesday night.
Swaps and Swing Trading
For day traders who close all positions before the rollover time, swaps are irrelevant. For swing traders and position traders who hold for days or weeks, swap costs can significantly erode profits.
| Holding Period | Daily Swap Cost | Total Swap Paid |
|---|---|---|
| 1 day | -$10 | -$10 |
| 1 week | -$10/day (+ triple Wed) | -$90 |
| 1 month | -$10/day (+ 4 triple days) | -$420 |
On some exotic pairs, monthly swap costs can exceed $500 per standard lot.
Carry Trading
Some traders use swaps as a profit strategy — called carry trading. They buy high-yielding currencies against low-yielding ones to collect positive swaps daily. While carry trades can be profitable in stable markets, sudden exchange rate moves can quickly erase months of swap income.
Tracking Swaps in Your Journal
Logging swap costs per trade reveals:
- Total swap expense — How much are swaps costing you per month?
- Swap-adjusted performance — Some trades that look profitable before swaps may be breakeven or negative after
- Optimal holding periods — How long can you hold a position before swap costs erode your edge?
- Strategy impact — Are your swing trades profitable net of swap costs?
PipJournal tracks swap fees per trade and includes them in your net P&L calculations, so you always know your true cost of trading.
