What Are Rollover and Swap and How to Use Them When Trading?

What Are Rollover and Swap and How to Use Them When Trading?

Depending on the trading style, Forex day traders may be faced with additional profits or expenses when it comes to holding positions open overnight.

If you are only planning on opening and closing your trades within one day, you won't need to worry about that, but it is still worth learning about in case you change your strategy or want to experiment with extended orders.

When a person opens and closes a position within one day, they do not have to pay additional interest. However, if they choose to hold the position open overnight, they need to consider the Forex rollover.

What is rollover?

Rollover is a process when the position is held open overnight. When that happens, the interest rates of the currencies in the FX pair are counted against each other. Depending on the interest rates, the trader is either credited or charged a particular sum.

What is the swap rate and how is the swap calculated?

The sum that the trader can gain or lose due to rollover is called swap. The rollover may result in swap benefits or swap charges, depending on the interest rate differentials. The interest rate of each currency is set by the country's central bank. Usually, the interest rates are influenced by major economic events in the country, which you can monitor in the economic calendar.

The swap rate is the interest rate of one currency in the pair minus the interest rate of the other one. Which currency you subtract from depends on the kind of trade you're opening: long or short.

Swap Long and Swap Short in Forex Trading

Long trade (or bullish trade) is basically when you make a purchase with the expectation the currency you bought will go up in value, and you will profit from this. Short trade (or bearish trade) is the opposite: you sell the currency pair with the expectation to profit from it losing in value. So, if in the EURUSD pair you are going long (buying euro and selling the US dollar), to calculate the swap, you subtract the dollar interest rate from the euro interest rate. If you're going short, you subtract the euro interest rate from the dollar interest rate.

Thankfully, you don't need to manually calculate the swap every time you engage in Swap trading: there are special tools for that. You can open the Contract specifications page to monitor the Forex Swap rates table: our table includes Swap Long and Swap Short rates.

Let's look at an example: take the AUDCAD Forex pair.

151-(2).jpg

Swap Long (in this case, 0.12) is the interest rate that is applied to your trade if you buy AUDCAD and keep the position overnight (meaning that you will gain an additional 0.12 points on your order). At the same time, the Swap Short (-5.57) is the interest rate that will be applied to your sell order if you hold it overnight (meaning that you will lose 5.57 points on your order). The figures are shown as points, which is a measure of the smallest price movement, so they do not represent any specific currency. They change depending on the Forex pair volatility, so you need to keep a close eye on the financial events calendar and Forex news.

You can also see the current Swap Long and Swap Short figures for a specific pair in your trading platform. For example, in MetaTrader 4 click the right mouse button on the currency pair and choose Specification. You might need to scroll down in the window that opens.

3-day swap

The rollover happens typically at 5 p.m. Eastern Standard Time (GMT-5) every weekday – at the end of the New York session. However, there is one special day for rollover – Wednesday.

Suppose you decide to keep the position open overnight after the Wednesday session is finished. In that case, the swap will be multiplied by three to account for rolling over the weekend when the Forex market is not working.

The triple Swap, or 3-day Swap, happens on Wednesday because most instruments need two business days to be settled (for all the financial transactions to be completed). So, if you open a position on Wednesday, it will be settled on Friday. If you roll the Wednesday position over to Thursday, the Swap rate will also account for rolling the position over the weekend – thus the triple rate.

Swap-free options

Forex trading is welcoming to people of all beliefs. Some brokers recognize that the Islamic faith prohibits its followers from receiving or paying interest and create special conditions for them. For example, the FBS has a swap-free option for Muslim clients who also want to enjoy trading and hold positions open overnight but cannot pay or receive swap interests on their positions.

Watch this video from our analyst to better understand the topic. If you're not a native English-speaker, try looking for your language in the list of subtitles available.

Latest news

ECB report is in focus

The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time. 

Markets await Biden to unveil "trillions dollars"

Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.

USD came under selling pressure

The US dollar’s weakness offered a boost to emerging-market currencies and oil.

Frequently asked questions

  • How to get the Trade 100 bonus?

    Boost your trading skills with free $100 from FBS. To activate this option, open a Trade 100 bonus account with $100 in it. Use the money during 30 days of active trading and trade five lots.  If you succeed, you can get your profit of $100. It is a win-win offer! Not only do you get a chance to profit, but you can also test the real markets and train your FX skills. 

  • How to open an FBS account?

    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward.  Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

Deposit with your local payment systems

Learn more

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera