In forex, a swap is the overnight interest charge or credit applied to positions held past the daily close. It results from the interest rate difference between the two currencies in a pair.

Swap Long vs. Swap Short

  • Swap Long — Interest for holding a buy position overnight
  • Swap Short — Interest for holding a sell position overnight

Either can be positive (you earn) or negative (you pay).

Example

EUR/USD (EUR rate: 3.75%, USD rate: 5.25%):

  • Long EUR/USD: You earn EUR interest, pay USD interest → Net: -1.50% → You pay
  • Short EUR/USD: You earn USD interest, pay EUR interest → Net: +1.50% → You earn

Swap Calculation

Daily Swap = (Interest Rate Differential / 365) × Position Value

Key Points

  • Swap rates are set by brokers and vary
  • Triple swap on Wednesday (weekend settlement)
  • Swap-free accounts available (Islamic accounts)
  • Can be a significant cost or income for swing traders
  • Check your broker’s swap rates in the platform specification