Swap
Also known as: Rollover Fee, Overnight Fee
The interest rate differential credited or debited to your account for holding a forex position open overnight past the daily rollover point.
Plain-English Meaning
When you trade forex, you are essentially borrowing one currency to buy another. The swap is the overnight interest you either pay or earn based on the central bank interest rates of the two currencies involved.
Why It Matters
Swaps represent a holding cost or benefit for swing and position traders. If you buy a currency with a high interest rate against one with a low interest rate, your broker may actually pay you a swap fee every night.
Simple Example
If the US Dollar has a 5% interest rate and the Japanese Yen has a 0% interest rate, going Long on USD/JPY will typically result in receiving a positive swap credit each night the position is held.
This educational example uses selected assumptions for reference calculation purposes. Real conditions may vary by broker, exchange, or instrument.
Beginner Mistake
Holding a long-term position in a pair with a heavily negative swap rate. Over weeks or months, the accumulated daily swap charges can erase the actual price profit of the trade.