If you are serious about forex trading then you need to understand more than just entry and exit points. One of the most overlooked yet important parts of currency trading is understanding what are swaps in forex trading and how they affect your overall returns. A forex swap is the interest you either receive or pay when you hold a trading position overnight. While this may seem like a small charge or bonus it can accumulate significantly over time.
For example in 2024 the average swap on the EURUSD pair ranged between minus 1.25 to plus 0.90 points depending on the direction and broker. If you held a position for thirty days that cost could total over thirty dollars per lot just on interest alone.
This guide breaks down every aspect of swaps from how they work to how they are calculated and how they apply to different currency pairs. We will also explore how swap rates affect gold trading signals especially for those who hold XAUUSD positions overnight. With real world data and practical strategies this blog will help you understand swaps clearly and use them wisely in your trading plan.
What Are Swaps in Forex?
Swaps in forex are commonly referred to as rollover interest or we can say that, swap in forex is the interest you pay or earn when you hold a trading position overnight. It is also commonly called rollover interest. This happens because in forex trading, you are dealing with two currencies at once. When you buy one currency and sell another, you are borrowing one to fund the purchase of the other.
Every currency has an interest rate set by its central bank. When you hold a position overnight, you are affected by the difference in interest rates between the two currencies. Depending on the direction of your trade and the interest rate difference, your broker may either credit or debit your account. That is the swap.
For example, if you are buying a currency with a higher interest rate and selling one with a lower rate, you might receive a positive swap. On the other hand, if you are buying a currency with a lower rate and selling one with a higher rate, you might have to pay a swap fee.
Why Do Swaps Exist in Forex Trading?
The forex market operates twenty four hours a day, five days a week. But when trades happen, they do not settle instantly. Settlement typically takes two business days. That delay creates a gap that must be accounted for. To handle this, brokers apply what is called a swap at the end of each trading day, usually around 5 PM New York time.
A swap is not some random fee or bonus. It reflects the interest rate difference between the two currencies in your position. If you are buying a currency with higher interest and selling one with lower interest, you might earn a swap. If the reverse is true, you might pay a swap. This small detail can have a big impact on your profit and loss over time.
Swaps are closely tied to how central banks manage interest rates, global financial policies, and market conditions. Understanding swaps gives you insight into deeper forces behind price movement and trading costs. Whether you are a day trader or someone who holds positions overnight, swaps affect your outcomes and must be considered in any solid forex strategy.
If you are learning how to trade forex for beginners, this is a key element that often gets missed. Many new traders focus only on charts and entry points but forget that the cost of holding a position overnight can eat into their profits. Knowing how swaps work allows you to make informed decisions and helps you avoid unnecessary losses over time. It is one of those hidden details that separate beginners from experienced traders.
Types of Swaps in Forex Trading
When you hold a forex position overnight, your broker will apply either a swap long or a swap short depending on the direction of your trade. These are the two primary types of swaps in forex trading and each has a specific role in how interest rate differentials impact your trade.
1. Swap Long
A swap long is applied when you hold a buy position overnight. Whether you earn or pay a swap depends on the interest rate of the currency pair involved.
If the currency you are buying has a higher interest rate than the one you are selling, you may receive a small payment. If it is lower, you pay a fee.
2. Swap Short
A swap short is applied when you hold a sell position overnight. The logic is similar.
If the currency you are selling has a lower interest rate than the one you are buying, you may receive a swap. If the selling currency has a higher interest rate, you might need to pay.
Brokers usually publish daily swap values in points or pips for each currency pair. These values are updated daily and can vary based on changes in central bank policies and liquidity in the market.
How Are Swaps in Forex Calculated?
The calculation of swaps is not as complex as it seems once you understand the interest rate dynamics behind it. It is mostly based on the difference between the interest rates of the two currencies in the pair. Traders who follow the best forex signals often pay attention to swap rates, as these hidden costs can significantly impact the overall profitability of a trade, especially when positions are held overnight.
Step 1 Interest Rate Differential
The first step in calculating swaps is to find the difference between the interest rate of the currency you are buying and the one you are selling.
For example if you are trading USD JPY and the US interest rate is five percent while Japan’s is zero point one percent the net differential is four point nine percent.
Step 2 Apply to Position Size
Next the broker applies this interest rate difference to the notional value of your trade. The larger your trade the larger the swap adjustment in real monetary value.
Brokers usually calculate this on a per day basis and convert the result into your account’s base currency.
Step 3 Broker Markup and Adjustments
Most brokers add their own markup or spread to the final swap calculation. This means that even if the raw differential suggests a small credit you might end up with a reduced amount or even a fee depending on the broker.
These adjustments are not visible upfront but they impact your final trading cost or profit. Some brokers also update these rates daily based on market volatility and liquidity.
How Swap Rates Affect Gold Trading Signals in XAUUSD Positions?
Many traders rely on gold trading signals for short-term and long-term strategies in the XAUUSD pair. However, one critical factor that can make or break your profitability especially if you are holding overnight — is the swap rate on gold positions.
XAUUSD trades are subject to swap rates because gold is considered a commodity quoted against the US dollar. These swaps are not fixed and vary daily based on the interest rate differentials between the US dollar and the funding rate for gold, which is typically influenced by global borrowing rates and market liquidity. Anyone exploring gold trading for beginners should understand that swaps are a core component of holding positions overnight and can significantly impact real outcomes.
For example, in June 2025, several brokers showed overnight swap charges on XAUUSD of approximately
- Long positions: -5.45 USD per lot
- Short positions: +2.65 USD per lot
This means if you followed a gold trading signal and held a long XAUUSD trade for five nights, your swap cost could exceed 27 USD per lot. On the other hand, if the signal suggested a short position, you could earn over 13 USD per lot in positive swap.
For traders who follow high-frequency signals or scalping strategies in gold, swaps may not matter much. But for swing traders or those holding gold positions for multiple days or weeks, this hidden cost can stack up quickly. A solid gold trading strategy will always account for these charges, especially during volatile economic periods like Federal Reserve announcements or inflation data releases.
If you are using automated gold trading signals or subscribing to premium Telegram groups, it is essential to understand how swaps are factored into risk management. Signals that look profitable on paper might not be so once swaps are deducted especially during weekends or rollover-heavy periods like the end of the month when triple swaps may be charged.
So, next time you follow a gold trading signal for XAUUSD, check the swap rate first. It could be the difference between a small win and an unexpected loss.
Positive vs Negative Swaps
In forex trading, swaps are not always a cost. Sometimes, they can act as a reward. When you hold a position overnight, your account is either credited or debited with a swap rate depending on the interest rate differential between the two currencies involved in your trade.
A positive swap means you will receive interest from your broker for holding the position. This happens when the interest rate of the currency you are buying is higher than the currency you are selling. For example, if you are long on USDJPY and the interest rate in the United States is significantly higher than Japan, you could earn interest overnight.
A negative swap is when you pay interest to hold the trade. This is more common, especially when traders hold positions against higher-yielding currencies.
It is important to know that swap rates are not fixed. They change based on central bank policies, liquidity, and even day of the week. For example, Wednesday swaps are often tripled to account for the weekend. Traders need to be aware of this if they want to avoid paying unnecessary fees or if they plan to use positive swaps to their advantage.
According to a 2024 report by DailyFX, over 70% of retail traders are unaware of how swaps affect their long term profitability. Being on the right side of swaps can be a subtle but powerful edge in trading.
Let’s take XAUUSD (gold vs US dollar) as an example. Gold does not yield interest, while the US dollar is tied to the Federal Reserve’s interest rate. As of July 2025, the Fed’s interest rate sits around 5.25%, and most brokers apply their own spread over this to calculate swaps.
Example:
- Buy XAUUSD (long): You’re effectively borrowing USD to buy gold. Since gold doesn’t pay interest and you’re borrowing a currency with a high interest rate, you’ll usually pay a negative swap.
- Sell XAUUSD (short): You may earn a positive swap, especially when USD rates are high, since you’re “holding” the USD side.
This is why traders using gold trading signals for long-term positions need to check swap rates. Even small overnight fees can eat into profits if a trade is open for weeks.
How to Use Swaps in Your Trading Strategy?
Smart traders do not just accept swap fees, they work with them. If you are holding positions for more than a day, swaps become part of your trading costs. Top forex traders understand this and factor swaps into their strategy to plan better and protect their profit margins.
Here’s how to use swaps to your advantage:
1. Pair Selection
Choose pairs or instruments where the swap works in your favor. For example, trading AUDJPY or USDTRY can offer strong positive swaps, depending on the interest rate spread.
2. Swap Arbitrage or Carry Trades
In carry trades, traders buy currencies with high interest rates and sell those with low rates — collecting positive swaps daily. This is more common in forex than gold but is part of the bigger swap strategy.
3. Avoiding Costly Swaps
For traders using gold trading signals, if the trade is a long on XAUUSD and expected to stay open for several days, it’s worth calculating how much the total negative swap might cost. Sometimes it’s better to exit before a Wednesday, when triple swaps are charged to account for the weekend.
4. Using Account Types
Some brokers offer Islamic accounts (swap-free) for traders who want to avoid swap fees entirely. If your strategy depends on holding trades for a long time such as waiting for swing setups on gold, this could be useful.
Example:
If a broker charges $7.15 per lot per night for a long XAUUSD position, and you hold that trade for 10 nights, you’re down $71.50 — just in swaps. If your total profit from that trade was $150, nearly 47% of your profit is lost to swap fees.
Tools to Track Forex Swap Rates
Accurate swap rate data helps you plan trades with better clarity. Many brokers publish their swap rates openly but it is important to verify and compare across platforms.
Here are some effective tools and platforms to track forex swap rates:
1. Broker Dashboards
Most regulated brokers such as IC Markets, Pepperstone, and FXTM offer a swap rate section in their trading platforms. You can view long and short swap rates for each currency pair directly in MetaTrader 4 or 5.
2. Swap Rate Calculators
Sites like Myfxbook and Investing dot com provide daily updated swap calculators where you can input your lot size and currency pair to estimate swap costs or earnings.
3. Economic Calendars
Swap rates often fluctuate after interest rate decisions. Keeping an eye on economic events using tools like Forex Factory helps you anticipate such changes and prepare your trades.
4. Forex Gold Signal Telegram
If you are into trading gold, XAUUSD or looking for expert signals that factor in swap impact, the forex gold signal telegram channel is a helpful resource. It provides free real time trading signals including suggestions on when to hold or exit trades based on upcoming swap costs. This helps traders avoid unnecessary fees and optimize profits especially during uncertain gold market moves.
5. Trading Journals
Track swap costs in your personal trading journal. Over time you will see patterns that can help you adjust your strategy. Knowing how much you pay or earn on average per trade in swaps adds depth to your performance review.
In 2024, a survey by FXStreet showed that 60 percent of profitable traders factored in swap data before executing long term trades. This shows that smart use of tools leads to consistent performance.
The Final Thoughts
Swaps are more than just technical adjustments. They represent a deeper link between trading activity and the global interest rate environment. Whether you trade manually or through a bot whether you scalp or swing trade swaps affect your results over time.
Ignoring swaps means ignoring a key cost or earning factor in forex. From simple overnight charges to billion dollar institutional deals swaps play a central role in how forex trading works.
Knowing how they are calculated when triple swaps happen how real money flows through the swap market and how to use them as a strategy can help traders improve both their planning and profitability.
If you are serious about forex trading understanding swaps is not optional. It is essential. For expert guidance and free trading support, join Forex Gold Signal Telegram channel and stay ahead with real market insights.