An overnight swap—also known as rollover—is the financing adjustment applied to positions held beyond the daily market close (typically 5:00 PM New York time in forex trading).
The swap amount is determined by the interest rate differential between the two currencies in a pair, as well as the broker’s markup. If the interest rate differential is positive, the trader may receive a credit; if it is negative, a cost is charged.
On Wednesdays, a triple swap is typically applied in forex markets to account for the weekend period.
For short-term traders, the swap is often negligible, but it can become a significant cost or income factor in longer-term positions or carry trade strategies.
Swap-free accounts offer an alternative for investors who wish to avoid swap charges.
