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What Is a Swap Fee in Forex?
Holding a position open overnight incurs a swap fee, often known as a rollover fee. Learn more about this here.
Updated October 5, 2023.
A swap fee in Forex, also known as a rollover fee, is interest that traders pay for maintaining a position until the end of the trading day. If traders maintain their positions at the daily rollover point, which occurs at 00:00 server time (or "tomorrow next"), the swap fee will be applied.
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What You Should Know About a Swap Fee
To calculate the swap fee, you need the current swap fee for the currency pair, your net pip value, and the number of nights you plan to hold your position.
The formula is pretty simple:
Swap = (pip value) x (swap rate) x (number of nights)/10
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Related Terms
- Pip Pips are the smallest value change that represents the spread—whether positive or negative—between the two currencies being traded.
- Forex (FX) Short for foreign exchange, this is the exchange of one currency for another at a specific rate.
- Spread This is the difference between a forex broker's buying and selling rate.
- Lot This transaction amount represents the number of currency units being traded.
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The Importance of Understanding Swap Fees
Knowing the swap rate for a currency pair will allow you to calculate the swap fee you’ll be charged if you hold your position overnight. You will be better able to assess the costs of keeping your position open against any prospective risks and potential rewards.
Note: Fortrade offers the ability to trade the price changes of instruments with CFDs and NOT buy/sell ownership of the instrument itself
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