What is swap (rollover) in forex?
In one line: Swap, also called rollover, is the interest your broker pays you or charges you for holding a forex or CFD position past the daily cut-off, usually 5 pm ET.
Why it exists
Every currency pair is 2 currencies, and each has its own interest rate set by its central bank.
When you buy a pair, you're in effect holding the first currency and borrowing the second. If the one you hold pays more interest than the one you borrow, you may earn a small credit. If it pays less, you pay a small charge.
Brokers apply it at the daily cut-off, usually 5 pm ET. Close before then and there's no swap.
A simple example
Imagine a pair where the currency you buy has a 4% rate and the one you sell has 1%. The gap is 3% a year.
On a position worth $10,000, 3% a year is about $300. Divide by 365 and that's roughly $0.82 a day, before the broker's markup.
Hold it the other way (sell the pair) and you'd pay about that much instead. Brokers add their own fee, so the credit is often smaller than the math and the charge bigger. Many swaps are negative both ways.
These numbers are a made-up example. Check your broker's swap table for real rates.
The triple-swap day
Forex deals normally settle 2 business days later. To cover the weekend, many brokers charge or pay 3 days of swap on one weeknight, often Wednesday. Your broker's site will say which day.
Why it matters
For a trade that lasts an hour, swap doesn't apply. For a swing trade held for 2 weeks (see Swing trading), it adds up. With Leverage, swap is charged on the full position size, not just your deposit.
A common mistake
Ignoring swap on long holds. A small negative swap every night can slowly wear down a trade that's going nowhere. Check the swap rate before planning a multi-week hold.
Some brokers offer swap-free accounts, often with other fees instead. Read the terms. More background in forex trading for beginners.
Questions
What time is rollover in forex?
Most brokers apply it at 5 pm New York time (ET), the end of the forex trading day. Spreads often widen for a few minutes around it.
Why is swap negative both ways?
The broker adds a markup to both sides. When the 2 interest rates are close, that markup can make both buying and selling cost a little each night.
Do stocks have swap?
Owning real shares has no swap. Holding stock CFDs overnight usually does carry a financing charge, and buying stock on margin means paying interest on the loan.
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