Swap
A swap (also called a rollover) is the overnight interest charged or credited for holding a Forex position past the daily cut‑off time. It reflects the difference between the interest rates of the two currencies in the pair and is applied automatically by the broker at the end of each trading day.
How It Works
When a trader keeps a position open after the 5 PM New York market close, the broker calculates a swap based on the interest rate differential between the base and quote currencies. If the currency you are long has a higher interest rate than the one you are short, you receive a credit; otherwise, you incur a debit. The swap is expressed in pips or as a percentage of the position size and is added to or subtracted from the account balance each night. Most brokers, including STB Provider, display swap rates in the MetaTrader 5 platform under the contract specifications.
Why It Matters for Traders
Swaps affect the cost of carrying a trade, which can turn a marginally profitable strategy into a loss—or vice‑versa—over weeks or months. Traders who use leverage to increase position size feel the swap impact more strongly because it is calculated on the full notional value. Long‑term traders and carry‑trade specialists monitor swap rates closely, as they can provide a steady income stream when the differential favors the held currency. Conversely, day‑traders who close positions before the rollover time usually ignore swaps, but they must still be aware of potential charges if a trade runs overnight unintentionally.
Example
| Item | Value |
|---|---|
| Currency pair | EUR/USD |
| Position size | 1 standard lot (100,000 EUR) |
| Direction | Long (buy EUR, sell USD) |
| EUR interest rate | 3.00% per annum |
| USD interest rate | 5.00% per annum |
| Interest rate differential | -2.00% (USD higher) |
| Annual swap cost | -2.00% × 100,000 EUR = -2,000 EUR |
| Daily swap (approx.) | -2,000 EUR ÷ 365 ≈ -5.48 EUR |
| Swap in pips (assuming 1 pip = 0.0001) | -5.48 EUR ≈ -5.48 pips |
In this example, holding a long EUR/USD position overnight results in a debit of about 5.5 pips each day because the USD interest rate exceeds the EUR rate. If the trader were short EUR/USD, the sign would reverse and they would receive a credit.
Key Takeaways
- Swap is the overnight interest applied to open Forex positions, derived from the interest rate differential of the two currencies.
- It can be a credit or a debit and is calculated on the full notional size, making its impact larger when using leverage.
- Traders who keep positions open for multiple days must include swap costs or gains in their profit‑loss calculations.
- Platforms such as MetaTrader 5, offered by brokers like STB Provider, display swap rates in the instrument specifications for easy reference.