Swap (Swap) is an implicit trading cost that should not be overlooked.

For all traders, besides spreads and commissions, there is one hidden cost that is often overlooked with concern: Swap (Swap). If you want to trade efficiently and avoid losing profits due to hidden costs, understanding the mechanism of swaps is essential.

What is a Swap? What’s Behind It?

Swap simply refers to the fee for holding a position overnight, also known as “Overnight Interest” in finance terminology. Put simply, it is the interest accrued when you leave your order open past market close until the next day.

The reason swaps exist is related to borrowing money. When you trade currency pairs like EUR/USD, you are borrowing one currency to buy another.

• If you go Long (Long) EUR/USD: You buy euros but borrow US dollars.
• If you go Short (Short) EUR/USD: You sell euros but borrow US dollars.

Each currency has its own interest rate set by its central bank, such as the FED for USD or ECB for EUR. When you borrow a currency, you pay interest on it; when you hold a currency, you earn interest. The swap is the net difference between these two interest rates.

( Practical Example

Suppose the Euro )EUR( has an interest rate of 4.0% per year, and the US dollar )USD### has 5.0% per year.

• If you Buy EUR/USD: You earn EUR interest (4.0%) but pay USD interest (5.0%) = a difference of -1.0%. You pay a swap.
• If you Sell EUR/USD: You pay EUR interest (4.0%) but receive USD interest (5.0%) = a difference of +1.0%. You receive a swap.

( Why Do We Usually Have to Pay?

In reality, the interest rate difference suggested by theory is often positive. However, intermediaries add their own markup to the fee. As a result, even if theory suggests you should receive a positive swap, practically it may turn negative or be less than expected. This is why the swap Long and Swap Short are often not equal.

Types of Swaps Traders Need to Know

) Positive vs Negative Swap

Positive Swap: You receive money into your account every night you hold the order, occurring when the interest profit is high enough to offset the handling fee.

Negative Swap: You pay money out of your account every night; this is the most common situation.

( Swap Long and Swap Short

These are swap fees applied depending on the direction of each order.

• Swap Long: Used when you Buy
• Swap Short: Used when you Sell

) 3-Day Swap ###Triple Swap( - The Common Pitfall for Beginners

Typically, swaps are calculated once per day, but there is one day in the week when you are charged 3 times. The reason is that the Forex market is closed on Saturday and Sunday, but financial interest continues to accrue. Usually, the triple swap applies on Wednesday night )for holding from Wednesday to Thursday###, combining the swaps for Saturday and Sunday.

Some brokers may use Friday or other days, so always check the specific details of your broker.

How to Calculate Swap Clearly

Knowing how much swap costs before trading is very important.

Method 1: Calculate from Points ###Using Standard Platform(

Formula: Swap )in money( = )Swap Rate in Points### × (Value of 1 Point)

Example:

• You Buy 1 Lot EUR/USD
• Specification shows Swap Long = -8.5 Points
• For EUR/USD, 1 Lot, 1 Point = (USD)
• Calculation: -8.5 Points × (= -$8.5 per night
• If it’s a 3-Day Swap: -$8.5 × 3 = -$25.5

) Method 2: Calculate from Percentage (%) per night

Formula: Swap $1 in money$1 = ###Total position value( × )Swap rate %(

Example:

• You Buy 1 Lot EUR/USD at 1.0900
• Swap Rate Long = -0.008% per night
• Total value: 1 × 100,000 × 1.0900 = 109,000 USD
• Swap: 109,000 × )-0.008 / 100( = -$8.72 per night
• 3-Day Swap: -$8.72 × 3 = -$26.16

) Key Point

Remember that swaps are calculated based on the “full” value of the position, not the margin you put up. For example, if you leverage 1:100 and only put up 1,090 USD margin to buy 1 lot, the swap of -$8.72 per night is actually (8.72 / 1090) × 100 = 0.8% of Margin per night. This means if the market is sideways (with no clear trend), the swap can eat into your margin, even if prices hardly move.

Risks and Trading Opportunities

Main Risks

Profit Erosion: You might make a profit of 30 USD, but if you hold for 3 nights and incur a 3-Day Swap of -26 USD, your net profit drops to only 4 USD.

Margin Call Pressure: In sideways markets, negative swaps cause slow losses daily. Many traders are forced to close positions even if their original plan is still valid.

Leverage Risks: Since swaps are based on full position value, the risk of Margin Calls increases if the market moves against you.

( Positive Opportunities

Carry Trade )Interest Rate Differential Trading(: The classic strategy is to borrow a low-interest currency )like JPY( and buy a high-interest currency )like AUD### to earn positive swaps daily. The main risk is exchange rate volatility; profits from interest can be offset by losses from currency fluctuations.

Swap-Free Accounts: Special accounts that do not charge swaps, designed for those with religious restrictions. They are also useful for Swing Traders and Position Traders holding orders for weeks or months. The cost is usually a wider spread or a fixed handling fee.

Summary

Swaps are not meaningless fees but hidden costs that impact your trading differently depending on your style.

• Scalpers closing within minutes: minimal impact
• Day Traders: moderate impact
• Swing/Position Traders: should pay close attention; consider choosing accounts with positive swaps or Swap-Free accounts.

Choosing a transparent broker (Broker) that clearly displays swap rates and provides good platforms for checking data will help you plan your trades confidently without hidden costs surprising you later.