What is a Swap (Rollover) in Forex?
A swap is the interest rate differential charged or credited to your account for holding a position overnight. It reflects the cost of borrowing one currency and lending another in a forex pair.
How It Works
Every forex pair involves two currencies, each with its own central bank interest rate. When you hold a position overnight, you're effectively borrowing one currency and lending another. The swap rate is the difference between those interest rates, adjusted by the broker. If you're long AUD/USD and Australian rates are higher than US rates, you receive a positive swap (credit). If rates favor the short side, you pay a negative swap (debit). Swap is applied once per day at the daily rollover time (usually 5 PM New York / midnight MT5 server time). Wednesdays typically carry a triple swap to account for the weekend settlement period.
Why It Matters
For day traders who close all positions before rollover, swaps are irrelevant. For swing traders and position traders holding for days or weeks, swap costs can add up and should be factored into the total trade cost.
Common Mistake
Forgetting about triple swap on Wednesdays. Positions held over Wednesday night incur three days of swap at once. For exotic pairs with large negative swaps, this single overnight charge can exceed the spread cost of the original entry.
Example
You hold a 1-lot long AUD/JPY position overnight. The swap rate is +$5.20 per lot. Your account is credited $5.20 at rollover. On Wednesday night, you'd receive $15.60 (triple swap).
Stoic Insight
Marcus Aurelius: 'Never value anything as profitable that compels you to break your promise to yourself.' If the trade plan didn't account for the cost of holding overnight, the profit on screen isn't the profit you keep.
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