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Hold a currency position past 5pm New York and the trade stops being a pure bet on price. From that moment it carries an interest bill or an interest credit, applied every night until you close. That adjustment is the rollover rate, and for anyone holding for more than a day it can matter as much as the spread.
Every spot forex trade is really two loans running in opposite directions. Buy AUD/USD and you are effectively borrowing US dollars to hold Australian dollars. The two countries do not pay the same interest, so the loans do not cancel out. The gap between the Reserve Bank of Australia's cash rate and the Federal Reserve's policy rate is the interest rate differential, and rollover is how that gap gets settled each night.
Platforms usually quote it as swap points, and the mechanics are the same as the overnight charge listed as forex swap rates in your contract specifications. If you are long the higher-yielding currency, you receive. If you are long the lower-yielding one, you pay. Size scales with your notional, so a mini lot moves a tenth of what a standard lot does.
This is why two traders can hold the same pair for the same week and end up with very different P&L. Direction sets the sign on the rollover; notional sets the size.
Rollover is not tied to midnight where you live. It fires when the New York session closes, because that is when the spot market pushes its value date forward by two business days. Positions open at that instant get charged or credited. Positions closed a minute earlier do not.
Wednesday is the odd one. Spot settles two business days later, so a trade rolled on Wednesday night jumps its value date from Friday to Monday to clear the weekend. Three days of interest, taken in a single hit. Swing traders regularly see their biggest swap of the week on a Wednesday and assume the broker has made an error. It has not.
That 5pm window has a second feature worth knowing. Forex liquidity thins out around the value-date roll, and some of the widest spreads of the day print right at the moment of the cut-off. Closing a position at 4:59pm to dodge a swap can cost you more in spread than the swap itself.
The arithmetic is simple: notional, multiplied by the rate differential plus or minus the broker's markup, divided by 365.
Take a short EUR/USD position of one standard lot, 100,000 euros, with the ECB deposit rate at 3.75% and the Fed at 5.25%. The 1.50% differential favours your long dollar leg. On a notional near $108,000 that is roughly $1,620 a year, or $4.44 a night, before the broker touches it. Add a 0.75% annualised markup and you clear closer to $2.20. Flip the trade long and you would be paying out around $6.60 a night for the same exposure.
What moves that figure around:
The swap points printed on your platform are rarely the raw interbank differential. Brokers nudge both sides: a bit more charged when you owe, a bit less credited when you earn. At 0.5% annualised the difference looks like rounding. On ten standard lots held for six months it is a four-figure sum, and it never appears as a single decision you made.
Swap-free or Islamic accounts solve the problem by removing the interest charge, but they typically recover it through an administration fee per lot per night or a wider spread. Check which one applies before assuming you have found a free lunch.
Currency strategies built around interest differentials are called carry trades, and rollover is the engine. Long a high-yielder funded by a low-yielder, you collect the differential every night the position stays open.
The catch is that forex volatility on high-yielding pairs is usually high for a reason. A short USD/ZAR position might credit $15 or $20 a night on a standard lot, which sounds generous until you notice the pair can move 1% in a session and erase two months of carry in an afternoon. Carry trades tend to grind upward for weeks and then give back the gains in days when a central bank shifts tone or risk appetite turns.
Day traders barely notice it. Swing and position traders feel it in the balance. Three mini lots of a negative-carry pair at $1.10 a night works out to about $25 a month once you factor in four triple-swap Wednesdays. On a $2,000 account, that is 1.25% of equity drained per month without a single losing trade on the statement.
Hedging makes it worse, not better. Holding a long and a short on the same pair does not net your swap to zero. You pay the debit side in full and receive the reduced credit side, so a hedged position is often a guaranteed nightly loss. Costs that arrive as a line item rather than a red trade are easy to rationalise away, which is the same blind spot that drives a lot of costly forex trading psychology errors around holding losers too long.
In MetaTrader 4 or 5, right-click the symbol, open Specification, and read Swap Long, Swap Short, Swap Type and the triple-swap day. Check whether the figure is quoted in points, as a percentage per year, or as direct money, because the three are not interchangeable. Most brokers also publish the full schedule on their contract specifications page, which is worth a look before you size into a multi-week position.
Then compare it against the costs you already watch. Spread and any forex slippage on entry and exit hit you the moment you trade. Rollover arrives quietly, every night, whether the trade is working or not.
Before entering a trade you plan to hold for three weeks, add the projected rollover to your cost the same way you would add commission. A position that needs 55 pips to break even because of negative carry demands a different target and a tighter thesis than one needing 12. If the setup only makes sense assuming price moves in your favour within a few days, hold it for a few days. If the carry is positive and the trend is intact, the nightly credit becomes part of the return rather than a slow leak.
Run the number once and it stops being an invisible charge. Run it on every swing trade and it becomes a filter: some positions are simply not worth holding through a Wednesday.
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