Swap and overnight financing: what it costs to hold a forex position

A swap, also called overnight financing or rollover, is the interest charged or paid on a forex or CFD position that you hold past the daily cut-off at 5pm New York time. On a currency pair, it reflects the difference between the interest rates of the two currencies, adjusted by the broker's markup. Depending on the pair and direction, a swap can be a cost or a small credit, and on Wednesday nights most brokers apply three days' worth at once.

If you only trade within the day, swaps never touch you. If you hold positions for days or weeks, they can become one of your largest costs, and they are one of the least understood. This guide explains where swaps come from, how to calculate them, and what to check before holding a position overnight.

Why holding a forex position costs or pays interest

When you buy EUR/USD, you are economically holding euros and owing dollars. In the real currency market, a spot trade settles two business days after it is agreed: the currencies actually change hands then. Banks that want to keep a position open without taking delivery roll it forward each day using a short-term transaction called a tom-next swap, which exchanges the currencies for one day and back again. The price of that roll reflects the interest rates on the two currencies.

Retail forex and CFD positions are never delivered, but brokers mirror the same economics. Each day at the rollover, they adjust your account to reflect:

• the interest you would earn on the currency you are long, and
• the interest you would pay on the currency you are short,
• minus the broker's own markup.

If the currency you are long has a higher interest rate than the one you are short, the differential is in your favour. If it is lower, you pay. The broker's markup is applied in both directions, so very often both long and short positions on a pair pay a swap, just by different amounts. You can read more about how brokers earn from this in how forex brokers make money.

When swaps are charged

Swaps are applied once a day at the rollover, which for forex is 5pm New York time, around 22:00 UK time for most of the year. A position open at that moment is charged or credited; a position opened and closed between two rollovers is not. Our guide to forex market hours and sessions explains the rollover and how daylight saving moves it in local time.

Two practical details:

• It is the moment that counts, not the duration. A trade opened at 21:55 UK time and held through 22:00 pays a full night's swap, even if it was open for only ten minutes. A trade held from 22:05 one evening to 21:55 the next pays none.
• Spreads are often wide around the rollover. Opening or closing positions just before it to avoid or catch a swap can cost more in spread than the swap itself. See reading a forex quote.

Triple swap Wednesday

On most forex pairs at most brokers, the swap charged on Wednesday night is three times the normal amount. This is not a penalty. It comes from the settlement convention.

Spot forex settles two business days after the trade date. A position rolled over on Monday night moves its value date from Wednesday to Thursday: one day. A position rolled on Wednesday night moves its value date from Friday to the following Monday, because nothing settles at the weekend. That is three days of interest, Friday, Saturday and Sunday, so three days of swap are applied.

Some instruments use different conventions. Certain CFDs on indices, commodities or shares apply the triple charge on Friday instead, and public holidays in either currency's country can add extra days on other nights. Your broker's contract specifications show which day the triple swap falls on for each instrument.

The common mistake is to look at the normal nightly swap, decide it is negligible, and then be surprised on Thursday morning by a charge three times larger.

How swaps are calculated

Brokers publish swap rates per instrument, usually as a figure for long positions and a figure for short positions, expressed either in points (pipettes) per lot or in account currency per lot per night. On MetaTrader and similar platforms they appear in the contract specification for each symbol. Some brokers show them as an annual percentage instead.

Underneath, the logic is:

Swap per night ≈ position value × (interest rate on the currency you hold − interest rate on the currency you owe − broker markup) ÷ 365

Some brokers use 360 for certain currencies, in line with money-market conventions, and the exact benchmark rates differ from broker to broker, so treat this as a way to understand the swap, not a way to reproduce your broker's figure to the cent.

Worked example: a long and a short on the same pair

These are illustrative interest rates, not current ones. Suppose:

• the base currency of a pair has an interest rate of 2.0%;
• the quote currency has an interest rate of 4.0%;
• the broker applies a markup of 0.5% a year to each side;
• you trade 1 standard lot with a position value of 108,500 dollars.

Long position (holding the 2% currency, owing the 4% currency): 2.0% minus 4.0% minus 0.5% equals minus 2.5% a year.

• Per night: 108,500 times 2.5%, divided by 365, is about 7.43 dollars charged.
• Wednesday night: three times that, about 22.29 dollars.
• A full week (five rollovers, with Wednesday counting as three): seven nights, about 52 dollars.

Short position (holding the 4% currency, owing the 2% currency): 4.0% minus 2.0% minus 0.5% equals plus 1.5% a year.

• Per night: 108,500 times 1.5%, divided by 365, is about 4.46 dollars credited.

Notice the asymmetry: the long pays 2.5% a year, while the short receives only 1.5%. The 1-percentage-point gap is the broker's markup, taken from both sides.

Worked example: the cost over a month

The same long position held for 30 calendar days pays roughly 30 nights of swap (weekends are covered by the Wednesday triple), so about 7.43 times 30, or 223 dollars. On a standard lot of EUR/USD, a pip is worth about 10 dollars, so that is around 22 pips of cost. A swing trade aiming for 60 pips over a month gives up more than a third of its target to financing before spreads and commissions. Our guide to spreads and commissions covers the trading costs on top.

Swaps on other CFDs

Overnight financing applies to most CFDs, not just currency pairs, but the formula is different.

• Index and share CFDs: usually a benchmark overnight rate for the instrument's currency (such as SOFR for US dollars, €STR for euros or SONIA for sterling) plus a broker markup for long positions, and the benchmark minus a markup for short positions. When rates are low, shorts often pay as well.
• Commodity CFDs: often based on futures prices, so some brokers apply a financing charge while others build the cost into the price when the underlying contract rolls.
• Cryptocurrency CFDs: where available, financing rates can be considerably higher than on other instruments.

On share CFDs, financing is the main reason a CFD gets more expensive than owning the share the longer you hold it. Our guide to what a CFD is compares the two.

The carry trade

Because swaps follow interest-rate differentials, a trader can, in principle, buy a higher-yielding currency against a lower-yielding one and collect a positive swap each night. This is the carry trade, a well-known strategy among institutional investors, typically funded in currencies with very low interest rates.

The appeal is obvious. The catches are less so.

• The exchange rate can move far more than the interest earned. A 3% annual carry is about 0.01% a day. A single bad day in the exchange rate can wipe out months of interest.
• Carry trades tend to unwind together. When many participants hold the same position and sentiment turns, they all try to exit at once. High-yielding currencies have historically fallen sharply in such episodes while funding currencies rallied.
• The broker's markup eats the differential. For a retail trader, a small rate gap can disappear entirely after markup, leaving both directions paying.
• Rates change. Central bank decisions can narrow or reverse a differential, as covered in our guide to central banks and interest rates.

None of this means the carry is irrelevant. For any position held for weeks, it is a cost or credit worth knowing about. It is just not a source of reliable income for a leveraged retail account.

Swap-free accounts

Many brokers offer swap-free accounts, often called Islamic accounts because they are designed for traders who cannot pay or receive interest for religious reasons. On these accounts, no swap is charged or credited at the rollover.

That does not mean holding positions costs nothing. Common alternatives include:

• an administration fee charged per lot per night, sometimes after a grace period of a few days;
• wider spreads or higher commissions on the account;
• limits on which instruments can be held swap-free, or for how long.

Brokers usually restrict these accounts to clients who need them for religious reasons and may convert an account back if it appears to be used purely to avoid swaps on carry positions. If you are considering one, read the account terms and compare the total cost with a standard account for the way you actually trade. Our guide to hidden broker fees lists other charges worth checking.

How swaps interact with leverage and margin

Swaps are calculated on the full position value, not on the margin you put up. That is the key to why they matter. With 30:1 leverage on a major pair, a 2.5% annual financing cost on the position is roughly 75% a year relative to the margin committed. You are not paying that on your own money; you are paying it on the money effectively being lent to you through leverage.

Swaps also reduce your account equity directly, which reduces your free margin. If you hold large positions for a long time, a steady drip of swap charges can bring your margin level closer to a margin call. Our guides to leverage and margin and margin call and stop-out explain how those thresholds work.

How to check and manage swap costs

1. Look up the rates. In your platform, open the symbol's specification and find the long and short swap figures and the triple swap day. Your broker's website should list them too.
2. Convert to money per lot per night. If the swap is in points, multiply by the pip value per point for your position size. A swap of minus 7.4 points on EUR/USD, for example, is minus 0.74 pips, or about 7.40 dollars per standard lot per night.
3. Estimate the cost over your intended holding period. Multiply by the number of nights, counting the triple day.
4. Compare it with your target and stop. If financing over the trade's likely life is a large share of the expected gain, reconsider the trade or the holding period.
5. Check after rate decisions. Swap rates change when central banks move, and brokers can change their markup. What was a credit last quarter may be a charge now.
6. Record swaps in your journal. Many traders track spreads and commissions but forget swaps. Recording them in a trading journal shows what your holding style really costs.

Common mistakes

• Ignoring the Wednesday triple. A position opened on Wednesday afternoon and closed on Thursday morning pays three nights of swap.
• Assuming a positive swap is income. A small credit means nothing if the exchange rate moves against you, and it can turn negative after the next rate decision.
• Holding losing positions "until they come back". Every night costs money, and the cost grows with time. Our guide to trading psychology covers why this is so tempting.
• Comparing brokers on spread alone. For swing and position traders, swap markups can matter as much as spreads. See how to choose a forex broker.
• Not reading the swap-free terms. Admin fees can be higher than the swap they replace.

Holding positions for longer does not remove the basic risk of leveraged trading: most retail CFD accounts lose money, and leverage magnifies losses. Our risk warning explains the main risks, and the glossary defines any terms used here.

Frequently asked questions

What time is the swap charged?

At the daily rollover, 5pm New York time, which is about 22:00 UK time for most of the year. Any position open at that moment is charged or credited a swap, regardless of how long it has been open.

Why is the swap three times bigger on Wednesday?

Spot forex settles two business days after the trade. Rolling a position on Wednesday night moves its settlement date from Friday to Monday, covering the weekend, so three days of interest are applied. Some CFDs on indices or commodities apply the triple swap on Friday instead.

Can I earn money from swaps?

On some pairs and directions the swap is a small credit, when the currency you hold has a sufficiently higher interest rate than the one you owe, after the broker's markup. In practice the credit is small compared with exchange-rate moves, and it can change or disappear when interest rates change.

Do I pay swap if I close before the rollover?

No. If a position is opened and closed between two rollovers, no swap is applied. Only positions open at the rollover moment are affected.

Are swap-free accounts really free of charges?

No account is free to use. Swap-free accounts remove the interest adjustment, but brokers usually replace it with an administration fee, wider spreads or other restrictions. Compare the total cost before choosing one.

Why do both long and short positions pay a swap on some pairs?

Because the broker applies a markup to each side. If the interest-rate difference between the two currencies is smaller than the markup, both directions end up paying, just by different amounts.