Swap
Swap, in retail forex and CFD trading, is the overnight financing adjustment applied to a position held past the daily rollover time, typically 17:00 New York time.
The adjustment reflects the interest rate differential between the two currencies in a forex pair, with the broker's markup applied. Before the markup, long the higher-rate currency receives swap and long the lower-rate currency pays it (on a very narrow differential, a 365-day against a 360-day count can reverse this); the markup reduces the credit and enlarges the debit, so the higher-rate side receives swap only when the differential exceeds the markup. Swap-free accounts remove swap; any substitute charge is set out in the broker's terms.
This page covers the mechanic; it is not trading advice.
Swap on a real position
Holding a long EUR/USD position past 17:00 New York means being long EUR and short USD. With the ECB deposit facility rate at 2.50% and the upper limit of the US federal funds target range at 4.00%, the differential is −1.50% annualised, applied daily. The broker adds a markup, so the swap it charges is larger than the policy-rate differential implies.
On EUR/USD and other pairs that settle two business days after the trade (T+2), Wednesday rollover applies three days of swap to cover the weekend unless a bank holiday moves the settlement dates. Rolling a position past 17:00 New York on Wednesday moves its settlement date from Friday to Monday, so one roll spans Friday, Saturday and Sunday.
Swap calculation: a daily worked example
For a long EUR/USD position of 1 standard lot held overnight, with the ECB deposit facility rate at 2.50% and the upper limit of the US federal funds target range (3.75–4.00%) at 4.00%:
Position notional = 100,000 EUR. Annualised differential = 2.50% − 4.00% = −1.50%. Daily swap before broker markup, on the actual/360 day count that EUR and USD money-market interest uses = 100,000 × −1.50% ÷ 360 = −€4.17 per day. Converted to USD at 1.0850: −€4.17 × 1.0850 = −$4.52 per day.
An illustrative broker markup of 0.5–1.5%, an assumption for this example, applied once to the net rate, widens the −1.50% differential to an all-in −2.0% to −3.0%, a debit of roughly $6 to $9 per day. The same position held past Wednesday's rollover is normally charged three days at once: approximately $18 to $27 in one debit, covering the weekend.
Holding the position for a full year of 365 nights at an all-in rate of 2.0% to 3.0% (the 1.50% differential widened by the markup) pays approximately $2,200 to $3,300 in swap alone, a 22% to 33% drag on a $10,000 account before any consideration of spread, commission, or directional movement.
Reversing the position direction reverses the sign on the underlying differential. A short EUR/USD position at the same rates earns positive swap before broker markup; the markup then reduces that credit, and a markup larger than the differential turns it into a debit. Both policy rates are set at central-bank meetings and every computed figure in this example moves when either changes, so the broker's swap table gives the figure that applies on a given night.
Related terms
Related articles
Common questions
Why does Wednesday have triple swap?
Spot forex settles within two business days of the trade; on EUR/USD and other T+2 pairs, trades made today settle in two business days. Rolling a position past Wednesday's 17:00 New York rollover moves its settlement date from Friday to Monday, across the weekend, so Wednesday rollover applies three days of swap rather than one unless a bank holiday moves the settlement dates. Each rollover charges one day of swap for every calendar day the settlement date moves, so at brokers that follow the interbank settlement calendar, a bank holiday that settlement has to skip changes which rollovers carry the extra days: before a Friday holiday, Tuesday's rollover covers four days (Thursday to Monday); before a Monday holiday, Wednesday's covers four (Friday to Tuesday). Most platforms show each multi-day charge as a single debit or credit at its rollover; this is convention, not malfunction. Other instrument classes can follow a different convention, such as a Friday triple charge or a charge on every calendar day; the broker's terms specify the convention for each instrument.
What is a carry trade?
A carry trade is a position held long-term to capture positive swap. The trader buys the currency with the higher overnight rate and sells the currency with the lower rate, collecting the differential minus the broker's markup each day; when the markup exceeds the differential, the position pays swap instead. Exchange rate movement is the risk: a small positive daily swap does not offset a large adverse pip movement.