According to the Bank for International Settlements, the global forex market sees over 7.5 trillion USD traded every day, making it the largest financial market in the world. More than 85% of these trades involve positions that are held overnight or longer. This is where swap charges in forex come into play.
Whether you are a seasoned trader or just starting, understanding what are swap charges in forex is crucial. These charges can impact profitability significantly, especially for long-term positions. Swap charges are the interest rate differentials between two currencies in a forex pair when a position is held overnight.
They can be either a cost or a gain, depending on the position you take. Traders who follow gold signals for intraday or swing positions also need to factor in swap costs, especially when trading XAUUSD pairs. This comprehensive guide covers everything you need to know, including how swap charges are applied, how to calculate them, and most importantly, how they affect your trading strategy and bottom line.
What Are Swap Charges in Forex?
Swap charges in forex are the costs or credits applied to your trading account when you keep a position open overnight. These charges stem from the difference in interest rates between the two currencies involved in a trade. Every time you hold a position past the market’s daily cut-off time, usually 5 PM New York time, your broker calculates a swap charge based on the interest differential.
In simple terms, if you are long on a currency that has a higher interest rate than the one you are shorting, you may receive a positive swap (interest income). If it’s the other way around, you’ll likely pay a negative swap (interest expense). Swap charges in forex can influence your long-term profitability significantly, especially in strategies that hold trades for several days or weeks.
Understanding swap charges in forex is not just for professional traders. Even beginners must be aware of how swaps work, as these fees can either hurt your return or, when used strategically, add a passive income stream.
The Concept of Rollover in Forex Trading
Rollover in forex trading refers to the process of extending the settlement date of an open position. Since forex trading is done on a spot basis, trades are technically settled within two business days. However, brokers automatically roll over open positions at the end of each trading day to the next value date.
This rollover is where swap charges in forex are applied. Depending on your position and the interest rate differential between the two currencies, you either receive or pay interest. The rollover is entirely automated by your broker, but its impact on your account balance is real.
Positive vs Negative Swap Charges in Forex
A positive swap is when you receive interest for holding a position overnight. This happens when the currency you are long on has a higher interest rate than the one you are shorting. For example, if you go long on USDZAR (USD at 5.5 percent and ZAR at 3 percent), the interest rate differential works in your favor.
On the other hand, a negative swap means you are paying interest. If you go long on EURJPY, and EUR has a lower rate compared to JPY, your account will be debited each night the position is held.
These swap charges in forex can range from a few cents to hundreds of dollars depending on your lot size, holding period, and the currency pair involved.
Where Swap Appears in Your Trading Platform
Most retail platforms like MetaTrader 4, MetaTrader 5, and cTrader show swap values in the “specifications” tab or directly under the trade or order window. You can view the swap for both long and short positions before placing a trade.
Additionally, after executing a trade, you can monitor daily swap costs in the trade history or the account journal. Brokers typically update swap rates daily, and some may even adjust them multiple times a week based on liquidity provider changes.
Why Swap Charges in Forex Matter for Traders?
Swap charges in forex are often dismissed as minor, but their long-term effect on profitability can be significant. While a single-day swap might look small, holding multiple positions for weeks or months without understanding what are swaps in forex can quietly drain your account. For traders using larger lot sizes or trading exotic currency pairs, the swap charges become even more impactful.
Understanding what are swaps in forex is not just a technical detail. It is a core part of cost management. Even if you have the perfect technical analysis, a negative swap can reduce your profit margin or turn a break-even trade into a net loss. On the other hand, a positive swap can reward you daily for holding the right pair.
Long-Term Swing Trade with Swap Loss
Imagine a trader opens a long EURUSD position with one standard lot and plans to hold it for 30 days. The broker charges a daily negative swap of $6 for holding that trade. Over 30 days, the trader pays $180 in swap charges. Even if the position ends in a small profit of $150 in price movement, the net outcome becomes a loss due to the accumulated swap.
This example shows why traders must account for swap charges in forex while planning long-term positions. Ignoring them can erode profits or worse, push a profitable trade into negative territory.
How Short-Term Traders Avoid Swap Charges
Day traders or scalpers who close their trades before the rollover time (usually 5 PM EST) can avoid paying swap charges. This is one reason why many short-term traders operate only within daily sessions. They use precise entries and exits and prefer not to be affected by overnight market volatility or funding costs.
Such intraday-focused forex trading strategies are designed to avoid overnight costs like swaps. But even in these fast-paced strategies, traders must be cautious of the exact rollover cut-off. A slight delay can trigger unintended charges.
Swap-Free Accounts for Muslim Traders
Some traders prefer to trade without paying or receiving interest due to religious beliefs. For such traders, brokers offer swap-free accounts, also called Islamic accounts. These accounts do not charge overnight interest, making them compliant with Shariah law.
However, traders should be cautious. Many brokers impose conditions such as higher spreads, restrictions on certain pairs, or limited trading durations to compensate for the loss of swap income. Always check the broker’s terms before opening a swap-free account to ensure transparency and fairness.
Types of Swap Charges in Forex
There are two main types of swap charges in forex: long swap and short swap. These represent the interest you either pay or receive depending on the direction of your trade and the interest rate differential between the currencies involved. Most traders assume all swaps are charges, but that is not entirely true. Depending on your trading position and the currency pair, you might earn interest instead of paying it.
Understanding the different types of swap charges in forex is essential for making informed decisions, especially when trading pairs with wide interest rate gaps. The type and direction of swap can significantly impact your daily holding costs or income.
Long Swap vs Short Swap
A long swap applies when you open a buy (long) position. If the base currency offers a higher interest rate than the quote currency, you may receive a positive long swap. However, if the base currency offers a lower rate, you will pay a negative swap.
A short swap applies to sell (short) positions. If the currency you are shorting pays less interest than the one you are long on, you will likely receive a swap. Otherwise, it results in a charge.
For example, going long on AUDJPY (where AUD has a higher rate than JPY) often gives a positive long swap. Shorting EURUSD, where EUR typically pays less than USD, could result in a negative short swap.
Role of Base and Quote Currency
The base currency is the first currency in a forex pair, while the quote currency is the second. Swap charges in forex are determined by the interest rates associated with both currencies. Brokers calculate the difference between these interest rates and apply the result as either a debit or credit to your trading account.
In many cases, the most traded currencies like USD, EUR, JPY, and GBP are involved. These currencies are highly liquid and reflect the monetary policies of some of the world’s most influential economies. If the base currency has a higher rate, going long might earn you interest. Conversely, if the quote currency has a higher rate, going short could lead to swap costs.
This is why it’s crucial to understand the interest rate environment and economic policies of the countries behind each currency especially when trading pairs made up of the most traded currencies, where even small interest rate changes can impact your swap outcomes significantly.
Average Daily Swap Charges for Major Pairs
| Currency Pair | Long Swap (USD) | Short Swap (USD) |
|---|---|---|
| EURUSD | -5.20 | 1.80 |
| GBPUSD | -4.10 | 1.30 |
| USDJPY | 3.90 | -5.60 |
| AUDUSD | 2.30 | -3.10 |
These values are based on a 1.0 standard lot and reflect average 2024 broker data. Actual swap charges in forex can vary daily and are also affected by broker conditions.
How to Calculate Swap Charges in Forex?
One of the most frequently asked questions by new traders is how to calculate swap charges in forex. Although many platforms show the swap values automatically, it’s important to know how these charges are derived. Swap is calculated based on the interest rate differential between two currencies, lot size, and the number of nights the position is held.
Having this knowledge gives you greater control over your trading costs and helps you plan trades more efficiently. The formula below shows a basic way to calculate swap charges manually.
Swap Charges in Forex Formula
The general formula used by many brokers is:
Swap = (Lot Size × Swap Rate × Number of Nights) ÷ 10
Let’s break it down:
Lot size is the trade volume. A standard lot equals 100,000 units.
Swap rate is provided by your broker and varies by currency pair and trade direction.
Nights refer to the number of days the position is held overnight.
This formula allows you to estimate your swap exposure before you place a trade.
Swap Charge Calculator Tools by Brokers
Most major forex brokers offer built-in calculators to help traders understand their potential swap costs. These tools are available on websites like IC Markets, Pepperstone, Exness, and FXTM.
You simply select the currency pair, position size, and number of days to see the exact swap charges. These calculators often provide long and short swap values side by side, making it easier to plan trades with minimal overnight cost.
Real Case Study: 1 Lot EURUSD Long vs Short
Let’s assume:
Long swap on EURUSD is -5.20 USD
Short swap on EURUSD is 1.80 USD
Trade volume is 1.0 standard lot (100,000 units)
If you go long EURUSD and hold it for 10 nights:
Swap = (1 × -5.20 × 10) ÷ 10 = -52 USD
If you go short EURUSD for the same period:
Swap = (1 × 1.80 × 10) ÷ 10 = 18 USD
This difference of 70 dollars in swap can make a significant impact, especially if combined with a small profit or loss in price action. That is why learning how to calculate swap charges in forex is essential for cost-effective trading. Many traders also rely on accurate forex signals to identify optimal entry and exit points, helping them avoid holding positions overnight when swap charges are high.
Swap Charges in Forex by Major Brokers: A Comparative Study
Swap charges vary widely across brokers due to differences in liquidity providers, fee models, and account types. Some brokers offer competitive swap rates to attract swing and position traders, while others focus on low spreads for short-term traders. Knowing how your broker handles swap charges in forex is critical to managing trading costs.
Below is a comparative look at swap charges across leading forex brokers. All data is based on 2024 published figures for standard accounts and 1.0 standard lot trades.
Broker Comparison by Currency Pair and Swap Rate
| Broker | EURUSD Long | EURUSD Short | USDJPY Long | USDJPY Short |
|---|---|---|---|---|
| IC Markets | -5.20 | 1.80 | 3.90 | -5.60 |
| Exness | -4.80 | 1.50 | 3.60 | -5.20 |
| Pepperstone | -5.10 | 1.70 | 4.10 | -5.80 |
| FXTM | -6.00 | 1.60 | 3.70 | -6.20 |
| EightCap | -5.40 | 1.40 | 3.50 | -5.90 |
What Makes One Broker Cheaper in Swaps
A broker’s relationship with liquidity providers and how they price overnight interest are two key factors that determine swap values. Some brokers absorb part of the cost, while others pass it fully to the trader. Spreads, commission, and swap charges are often balanced to appeal to different trading styles.
It’s important to read your broker’s swap policy. Some brokers even update their swap rates daily based on the funding market, while others fix them weekly.
Brokers Offering Swap-Free Accounts
Several brokers provide swap-free accounts designed for traders who do not wish to pay or receive interest. These accounts are especially popular in Islamic regions. Popular brokers offering swap-free options include:
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IC Markets
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Exness
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FXTM
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XM
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AvaTrade
However, swap-free accounts often come with conditions. Some brokers may limit the duration you can hold trades or widen the spreads to offset lost swap income. Always read the fine print to ensure the account meets your needs.
How Interest Rates and Central Bank Policies Affect Swap Charges in Forex?
The core driver of swap charges in forex is the interest rate differential between two currencies. These rates are not fixed randomly. They are influenced by monetary policies set by central banks. When a trader holds a position overnight, the broker calculates the swap based on how much interest is charged on the borrowed currency and how much is earned on the one that is owned.
For example, if the US Federal Reserve raises interest rates while the European Central Bank holds steady, traders going long on USD and short on EUR will benefit from positive swaps. This is why central bank news and macroeconomic trends must always be considered when planning long-term trades.
Interest Rate Differentials and Their Role
Interest rate differentials refer to the difference between the interest rates of two currencies in a pair. This difference determines the amount of swap paid or earned.
If the first currency in the pair (base currency) has a higher interest rate than the second (quote currency), then traders holding long positions may earn interest. The reverse applies when the base rate is lower. Swap charges in forex are always based on this principle.
For example, when trading USDJPY:
-
If the US rate is 5.25 percent and Japan’s rate is 0.10 percent, a long USDJPY trade earns daily interest.
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If this same position is reversed, the trader pays the interest.
2023 and 2024 Central Bank Policy Summary
In 2023, the US Federal Reserve increased interest rates multiple times to combat inflation, reaching a high of 5.5 percent. The European Central Bank followed with moderate increases, pushing rates to 4 percent. Meanwhile, Japan maintained an ultra-low rate policy around 0.10 percent, and Australia’s RBA hovered near 4.35 percent.
These policy moves significantly affected swap charges in forex:
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USDJPY long trades offered strong positive swaps.
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EURUSD shorts became less expensive due to narrowing gaps.
Traders who monitored these rate movements could adjust their positions to benefit from swap gains or avoid swap losses.
Predicted Central Bank Movements for 2025
As we move through 2025, analysts from major financial institutions forecast that central banks may begin lowering interest rates due to slowing global growth. If the Federal Reserve cuts rates while the ECB or BOJ holds, the swap dynamics will shift.
Traders should track scheduled interest rate announcements and market expectations. A change in interest rate can immediately impact swap charges in forex and affect the cost or benefit of holding specific currency pairs.
Strategies to Minimize or Benefit from Swap Charges in Forex
Many traders consider swap charges in forex a burden. However, with the right strategy, they can become an asset. Just like spreads and commissions, swaps are a cost or an opportunity depending on your approach. Traders who follow methods like the SMC trading strategy often structure their trades based on market imbalances and liquidity zones, which may require holding positions overnight.
By understanding how to time trades, choose currency pairs, and structure your portfolio, you can reduce the cost of swaps or even turn them into consistent daily earnings.
Below are some effective strategies that traders use to manage swap charges in forex.
Carry Trade Strategy Using Positive Swaps
A carry trade involves borrowing a currency with a low interest rate and using it to buy a currency with a higher rate. If done correctly, the trader earns the difference daily as a positive swap.
For example:
Long AUDJPY: Borrowing Japanese yen at 0.10 percent and earning on AUD at 4.10 percent.
This difference results in a positive swap income, making carry trades profitable even without price movement.
Carry trades work best in stable markets and with brokers that offer competitive swap rates. They are long-term plays and require proper risk management.
Trade Timing and Swap Avoidance
One simple way to reduce swap charges in forex is by managing your trade timing. Brokers typically apply swaps at a fixed daily time, such as 5 PM EST. Closing a trade before this time avoids overnight charges.
Traders should also avoid holding trades on Wednesdays, as most brokers apply a triple swap charge that day to account for the weekend rollover. Being aware of these timing windows can prevent unnecessary costs.
Triple Swap Wednesdays: What to Know
Since forex trades settle two business days after execution, holding a position on Wednesday means the value date pushes into the weekend. Because markets are closed on Saturday and Sunday, brokers apply three days’ worth of swap charges on Wednesday night.
This is often the largest daily charge and can surprise new traders. To manage this, some traders prefer to:
Avoid holding trades through Wednesday night.
Use Wednesday as an exit day for swap-heavy positions.
Being mindful of the calendar reduces surprises and improves swap cost efficiency.
Common Myths and Mistakes About Swap Charges in Forex
Many traders misunderstand swap charges in forex or treat them as too minor to matter. However, over time, these beliefs can lead to costly errors. Misunderstanding how swaps are calculated or failing to monitor them can slowly eat into profits.
Swap charges should not be ignored, especially by traders who frequently hold overnight positions. Below are some of the most common myths and mistakes that surround this crucial concept.
Myth: Swap Charges in Forex Do Not Matter for Small Trades
Some traders believe that swap charges only affect large accounts. This is false. Even a micro lot, if held for many days, can accumulate swap fees that exceed any earned profit. Over time, these small costs can add up and result in underperformance.
Monitoring swap charges should be part of every trader’s risk and cost management routine, regardless of account size.
Mistake: Holding Positions Overnight Without Checking Swaps
Many traders plan trades based on technical analysis but forget to check the swap charges. This becomes a costly mistake, especially on pairs with wide interest rate differences. Holding such positions for multiple nights leads to losses that could have been avoided.
Before entering any position, traders should check the expected swap values and adjust lot size or timing accordingly.
Myth: All Swap-Free Accounts Are Truly Swap-Free
While swap-free accounts are designed for religious compliance, some traders misuse them to avoid costs. Brokers are aware of this and often add additional fees, widen spreads, or limit the holding time.
Assuming that a swap-free account is always cheaper is incorrect. Traders must read the broker’s terms carefully. In some cases, the extra cost may outweigh the benefit of not paying swap.
The Final Thoughts
Swap charges in forex are often hidden in plain sight, yet their long-term impact on your profits can be massive. Whether you are building a carry trade strategy or just trying to avoid overnight fees, knowing what are swap charges in forex and how to calculate swap charges in forex gives you a real trading edge.
These charges are not random. They are influenced by global interest rates, broker rules, and your trade positions. Smart traders use this knowledge to protect and grow their accounts—while others lose money without even knowing why.
If you are serious about results, it is time to go beyond basic trading. Join the forex gold signal telegram to get accurate gold trade signals and expert insights that help you stay ahead of every cost including swap charges.
Do not let swap charges drain your profits silently. Understand them, plan around them, and trade with full control.