What Is Swap in Forex? Overnight Rollover Fees Explained

Every time you hold a forex position past 5pm EST, you pay or earn swap. Here is exactly how it works — and how to use it to your advantage.

What Is Swap (Rollover)?

Swap is the interest you pay or earn for holding a forex position overnight. Since forex involves borrowing one currency to buy another, you pay interest on the borrowed currency and earn interest on the purchased currency. The net difference is your swap rate.

At 5pm EST (New York close), all open forex positions are "rolled over" to the next trading day. Your broker automatically credits or debits the swap amount from your account.

Positive Swap vs Negative Swap

• Positive swap: You EARN money for holding. Happens when you are long a high-interest currency and short a low-interest one.
• Negative swap: You PAY money for holding. Happens when you are long a low-interest currency and short a high-interest one.

Example: Long AUDJPY. AUD interest rate = 4.35%. JPY interest rate = 0.25%. You earn roughly 4.10% annualized. Short AUDJPY: you pay 4.10%. This is the carry trade in action.

Triple Swap Wednesday

Forex settles T+2 (two business days after the trade). A trade opened Wednesday settles Friday. But if you hold through Wednesday, settlement rolls to Monday — spanning 3 days (Fri, Sat, Sun). So Wednesday swap is TRIPLED to account for the weekend.

How to Calculate Swap Cost

Swap Cost = Lot Size × Contract Size × Swap Points × Pip Value × Nights

Example: 1 standard lot EURUSD (100k). Long swap = -3.5 points, short swap = +1.2 points. Holding long 1 night: 1 × 100,000 × (-3.5/100,000) × $10 = -$3.50. You pay $3.50 per night.

Holding for 30 days: -$105. On a $10,000 account, that is 1% just in swap costs. Swap fees add up — especially for long-term positions.

Carry Trade Strategy

The carry trade exploits interest rate differentials. Go long high-yield currencies (AUD 4.35%, NZD 3.50%) and short low-yield currencies (JPY 0.25%, CHF 0.25%). You earn the interest spread daily — win or lose on the currency movement.

Risk: currency depreciation can wipe out years of interest in days. AUDJPY dropping 5% costs more than a year of 4% carry. This is why carry trades work best in low-volatility, risk-on environments.

Swap-Free (Islamic) Accounts

Many brokers offer swap-free accounts for traders who cannot pay/receive interest for religious reasons. Instead of swap, brokers charge a fixed administration fee. These accounts typically have wider spreads to compensate.