Swap in forex or other financial assets is the interest plus the broker’s mark-up you pay or receive for holding your trading position overnight.
Swap is also known as the rollover interest rate.
If you are long or short, your broker will credit or debate your account, depending on the swap rate, trade size, pip size, and the number of days.
Your broker will give you money if the swap rate is positive and will take money from you if it is negative.
The swap rate is different if you hold a long position or a short position. Sometimes one is negative and the other is positive. However, mostly both are negative, which means that you pay interest for holding positions overnight if you are holding a long or short position.
Swap is not a large amount of money unless you keep your position for a very long time. Your forex broker usually quotes you the amount of Swap in pip, which is commonly less than a pip.
Your forex broker charges you a swap unless you have an Islamic bank account. However, some brokers do not charge you swap if you have Stock CFD, crypto, and… positions. You need to check out their website.
Your broker charges you Swap at the end of every working day of the broker’s location. Since Saturday and Sunday are not working days, your broker charges you three days’ Swap at the end of Friday.
How to Calculate Swap in Forex?
Generally, most brokers if not all, provide you with a swap calculator on their website. You can calculate the Swap of any instruments and read their policies.
Often, brokers provide you with the swap of various instruments in pip or fiat currency. Do not forget to check out their website.
The general formula for calculation of swap is the following:
Swap = Trade Size * Pip Size * Swap Rate * Number of Days
Example:
Calculate a swap of 2 lots of EURUSD charged for three days with the swap rate of -0.2.
Solution:
Swap = 200,000 * 0.0001 * (-0.2) * 3 = -12
Based on the above specifications, your broker charges you $12 for three days of open positions of EURUSD.
