Also called: swap fee, rollover fee, overnight financing
The interest you pay or earn for holding a forex position open overnight — based on the rate difference between the two currencies in the pair.
Every forex pair has two interest rates baked in — the rate of the base currency and the rate of the quote currency. When you hold a position past 5pm New York time (the daily rollover), the broker either credits or debits your account with the difference between the two rates, prorated to your position size. That credit or debit is the swap.
If you're long a high-yielder against a low-yielder (long USD/JPY when Fed rates are 5% and BoJ rates are 0.1%), you EARN swap. If you're short the same pair, you PAY swap. Swap rates also include the broker's markup, which varies wildly between brokers.
Swap is small for a single overnight hold (often $1-5 per mini lot) but it compounds for swing traders holding for weeks. A long USD/JPY position held for a year in 2023 might have earned 8-10% in swap alone, on top of any price appreciation.
Carry traders longing USD/JPY through 2022-2023 earned swap on the rate gap between Fed at 5% and BoJ at 0%. Many of them banked 6-figure swap income on top of the 35% price rally.
Frequently asked about swap
What is a swap in trading?+
The interest you pay or earn for holding a forex position open overnight — based on the rate difference between the two currencies in the pair.
When will I see swap used in real trading?+
On any position held past 5pm New York. Wednesday rollover triggers a triple swap (covering the weekend).
What is the most common mistake traders make with swap?+
Ignoring swap when planning a swing trade. A pair with -$8/day swap held for 20 days costs $160 — that can flip a winning trade into a loser.
What do experienced traders know about swap that beginners don't?+
Always check the swap table before entering a multi-day position. If you're going to hold, you want to be on the side that PAYS you swap, not eats it.
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