Swap (rollover)

What a swap (rollover) means

In retail forex and CFD trading, a swap is the interest amount credited to or debited from your account when you keep a leveraged position open past the broker's daily cut-off time. It is also called rollover, overnight financing or the financing charge. It is not a spread or a commission: it is a holding cost, or sometimes a holding income, that depends on how long a position stays open.

The origin lies in the spot forex market. Spot trades settle two business days later, so positions held beyond that date must be rolled forward. Brokers handle the roll for you, and the swap reflects the interest rate difference between the two currencies, plus the broker's own markup.

Swaps appear on forex, index CFDs, commodity CFDs, share CFDs and crypto CFDs. Each instrument has its own long and short swap rates, which can be positive or negative.

How it works

For a currency pair, you effectively borrow one currency and hold the other. If you buy EUR/USD, you hold euros and borrow dollars. You earn the euro interest rate and pay the dollar interest rate. The swap is roughly the difference, scaled to the position size, adjusted by the broker's markup, so the figure for the trader is usually less favorable than the pure interest difference.

Key points of the process:

1. The cut-off time is set by the broker, often at the end of the New York trading day.
2. If the position is open at that moment, the swap is applied.
3. The rate is quoted separately for long and short positions, often in points, pips or as an annual percentage.
4. Wednesday is commonly a triple swap day for forex, because the settlement of a Wednesday roll covers the weekend. Other instruments may use a different day.
5. Swap rates change over time as central bank interest rates and market conditions change.

For CFDs on shares and indices, financing is often calculated as a benchmark interest rate plus or minus a spread, applied to the full position value. Long positions typically pay it, while short positions may receive part of it.

A worked example

The numbers below are illustrative. You buy 1 lot (100,000 units) of a pair where your broker shows these swap rates: long -6.50 USD per night, short +1.20 USD per night.

• Holding a long position for 5 nights, including one Wednesday triple: nights counted = 4 normal + 1 triple = 4 + 3 = 7 charges
• Total swap: 7 × -6.50 = -45.50 USD

Over the same period the short side would have received 7 × 1.20 = +8.40 USD.

Now an index CFD. Suppose a position value of 20,000 USD, a benchmark rate of 4% a year and a broker markup of 2.5% for longs.

• Annual rate for longs: 4% + 2.5% = 6.5%
• Daily charge: 20,000 × 6.5% ÷ 365 = 3.56 USD per day
• Ten days: about 35.60 USD

A trade intended to be held for a few minutes pays nothing, while the same trade held for weeks accumulates a noticeable cost that should be compared with the expected move.

Why it matters

Swap turns a position that looks cheap at entry into an expensive one if you hold it for long. For a day trader closing before cut-off, swap is irrelevant. For swing traders and long-term holders it can be a major part of the cost, sometimes larger than the spread.

It also creates the carry idea: in a high-rate currency against a low-rate one, the long side may earn positive swap. However, broker markup, changes in rates and the exchange rate movement itself can overwhelm that effect.

Swap schedules differ between brokers, instruments and account types. Some offer swap-free accounts for clients who cannot pay or earn interest, usually with other fees instead.

How to use it in practice

1. Find the swap table in the platform's contract specification or on the broker's pricing page, for long and short separately.
2. Check the unit: points, pips, currency amount or annual percentage.
3. Note the cut-off time and which day carries the triple swap.
4. Estimate the cost of your intended holding period before opening the trade.
5. Compare swap rates between instruments that give similar exposure.
6. Recheck the figures regularly, since they change with interest rates.
7. For long holding periods, consider whether another product, such as a fund or a futures contract, has lower financing costs.

Common mistakes and misconceptions

• Assuming swap is always a cost. For some pairs and directions it is a credit.
• Ignoring triple-swap day and being surprised by a bigger charge.
• Expecting the swap to equal the central bank rate differential. The broker's markup is added.
• Believing swap is charged on intraday trades closed before the cut-off. It is not.
• Forgetting that swap rates are not fixed and can change without a trade being touched.

Risks and limitations

Swaps can erode profits on positions held over long periods, and a high carry can disappear if rates change or the currency moves against you. Positive swap does not make a trade low risk: exchange-rate moves are usually larger than daily interest. Leveraged products carry a high risk of rapid loss. Rules on financing disclosure, and the way it is calculated, differ by broker and jurisdiction.

How Brokeli looks at it

We treat overnight financing as part of the total cost of trading, next to spreads and commissions. In broker research we record published swap schedules or financing formulas, the cut-off time, triple-swap days and whether swap-free accounts exist. These items come from published research snapshots, so comparisons use the same verified fee data rather than a single headline number.