Swap / Rollover

Swap, also called rollover, is the daily interest charge or credit applied to an open forex position held overnight. Every spot FX trade is implicitly a short-term loan: you are borrowing one currency to hold another, and the two currencies pay different short-term interest rates. The swap is the daily settlement of that interest difference.

How it works

If you are long a currency that pays a higher overnight rate than the one you are short, you receive a small credit. If you are long the lower-yielding side, you pay. The size of the credit or charge is roughly the rate differential, prorated to one day, applied to the notional value of the position.

For a 1-lot long-USD/JPY position with Fed funds at 4.25% and BOJ at 0.50%, the differential is 3.75% annualised. At spot 156, the notional value is roughly ¥15.6 million, or about $100,000. The daily swap credit is approximately $100,000 × 3.75% ÷ 360 ≈ $10.40 per night. Spread across many nights, it accumulates; held for a year, it is several thousand dollars on a standard lot, in the right direction.

The actual swap rates your broker charges are typically marked up from the interbank differential. Most brokers publish their swap table; check it before assuming the “real” rate.

Triple-swap Wednesdays

Spot FX settles two business days after the trade date (T+2). A position held over the weekend would normally accrue swap for Saturday and Sunday, but those are not trading days, so the weekend’s swap is rolled into the Wednesday rollover. Wednesday swaps are typically three times the usual rate.

The convention catches beginners often. A long-USD/JPY trader expecting their usual $10 swap on a Wednesday sees a $30 entry instead and assumes something has gone wrong. It has not. The calendar is doing its job.

”Swap-free” accounts are rarely free

Many brokers offer swap-free or Islamic accounts, marketed on the basis that swap (an interest charge) is prohibited under some religious traditions. These accounts typically replace the swap with one of the following:

• A flat administration fee per day, sized to roughly the swap amount.
• A wider spread that includes the equivalent cost.
• A time limit after which positions held in the swap-free account are subject to the standard swap rate.

The net cost of a swap-free account is usually similar to a standard account; it is presented differently rather than eliminated. Worth reading the terms before assuming you have escaped the cost.

When swap matters

For day traders and scalpers who close positions before the nightly rollover, swap is irrelevant. For swing traders and position traders holding for days to weeks, swap can be a meaningful component of total return, in either direction.

A long-USD/JPY position held for a year, in the recent rate regime, would pay several thousand dollars in negative swap if the trader was on the wrong side of the carry, or earn the same amount in positive swap if on the right side. The same trade, the same chart pattern, with completely different P&L depending on direction relative to the rate differential.

See Trading Costs Explained for the cost framework, and Carry Trades and Tail Risk for the strategy built around capturing swap as the dominant return driver.