Overnight Financing
Swap (Overnight Financing) Explained
Clear explanation of swap/overnight financing: what it is, when it’s charged, how it’s calculated, how to view it in MT4/MT5, Islamic (swap-free) accounts, futures roll, and the carry-trade strategy.
Swap
Overnight
Department
OTM Academy
Category
Fundamental Analysis
What Is a Swap in Trading?
A swap (overnight financing/rollover) is the interest adjustment applied to positions held overnight. It also applies to CFDs. The fee is calculated on the notional value of the open trade and can be negative (you pay) or positive (you receive) depending on the instrument, direction (buy/sell), interest-rate differential, and broker markup.
With leverage, you effectively borrow funds to open a position; the currency you sell is “borrowed” and accrues interest against you, while the currency you buy may earn interest for you. Broker financing and other costs typically make the net swap negative, but positive swaps can occur.
What Determines the Swap?
Broker: each broker posts its own long/short swap rates per symbol.
Side: long and short have different rates.
Instrument: e.g., EUR/USD swap differs from USD/CAD; commodities often have negative swaps both ways due to storage/carry.
Holding days: charged per night; weekend triple-swap is applied on the broker’s designated day (often Wednesday for FX, sometimes Friday), to account for Saturday–Sunday.
Notional value: larger position ⇒ larger swap.
When Is Swap Charged?
Most brokers post swaps around server midnight (e.g., 23:00–00:00 server time). On the triple-swap day, holding past rollover applies 3× the daily swap. Always confirm the exact timing in each symbol’s Contract Specifications.
How to Calculate & Read Swap
Brokers may quote swaps as points/pips per day or as a daily/annual %.
If quoted in points: Swap Value = Point Value × Swap Points × Lots (sign shows pay/receive).
If quoted as annual %: Daily Swap = (Notional × Annual %) / 365 (then apply sign for long/short).
Because rates, carry, and broker markups vary, long/short can both be negative for some symbols (common in commodities/indices).
Swap & Holding Horizon
Short-term/day trading: little to no swap impact.
Swing/long-term: swap accumulates daily and can materially affect P&L—especially on large notional sizes. Consider position sizing, selective holding, or instruments with favorable carry.
Special Cases & Strategy
Futures CFDs: classic exchange-traded futures don’t have overnight interest; when brokers offer contract roll/renewal, costs can arise from the price difference (contango/backwardation). Understand roll terms before renewing.
Carry Trade Strategy: borrow a low-rate currency and invest in a higher-rate currency (e.g., historically JPY → AUD/NZD). It seeks to earn daily positive swap, but FX moves can offset or exceed the carry. Always combine carry with risk controls (stops, sizing, macro monitoring).
