What is a Swap (Rollover) ?
Interest / Swap / Rollover refers to the interest traders may earn or be charged for holding open positions more than 1 day. Forex market calculates interest on a daily basis. At the end of each trading day at 5:00 pm New York timezone, traders will see the interest charged or interest income credited to their accounts To convert New York timezone to your local timezone please visit : http://www.timeanddate.com/worldclock/timezone.html?n=179
When opening forex transactions, the actual value date is two days forward. A deal which is done on Monday is for Wednesday’s value. A deal done on Friday is for Tuesday’s value (Saturday and Sunday are not couted), and so on. Please note : On Wednesday the amount of swap is multiplied three times (tripled) to compensate weekend holidays which swap is not charged.
How to Calculate Swap:
Traders will earn positive swap if the currency bought has greater swap rate than borrowed one.
Example :
USD/JPY Pair. USD Swap Rate = 5.25% , JPY Swap Rate = 0.5%
Buy USD/JPY means a trader is buying USD by borrowing JPY. Since bought currency’s swap rate (USD) is greater than borrowed currency’s swap rate (JPY), the trader will earn interest income : 5.25% - 0.5% = 4.75% When a trader Sell USD/JPY (means borrowing USD to buy JPY), the trader will be charged by interest fee : -5.25% + 0.5% = -4.75%
Example 2:
EUR/USD Pair. EUR Swap Rate = 3.75%, USD Swap Rate = 5.25%
Buy EUR/USD means a trader is buying EUR by borrowing USD. Since bought currency’s swap rate (EUR) is smaller than borrowed currency’s swap rate (USD), the trader will be charged by interest fee : 3.75% - 5.25% = -1.5% When a trader Sell EUR/USD (means borrowing EUR to buy USD), the trader will earn interest income : -3.75% + 5.25% = 1.5%
Forex Broker usually provides a list of daily swap rates for every currency pairs available. Traders could find interest fee / earning based on Buy or Sell positions they will trade. (swap is usually in $ or pips value). If the swap value is quantified in pips, traders need to convert pip to dollar by calculating pip value of corresponding currency pair.
At the image above, we can see that by holding Buy GBP/USD for more than 1 day, a trader will earn $12.81/day (Standard Lot). To check swap rate for a specific currency at MetaTrader Platform : Click right mouse button at forex quotes list => Symbols => Select desired currency pair => Properties
Interest / Swap / Rollover refers to the interest traders may earn or be charged for holding open positions more than 1 day. Forex market calculates interest on a daily basis. At the end of each trading day at 5:00 pm New York timezone, traders will see the interest charged or interest income credited to their accounts To convert New York timezone to your local timezone please visit : http://www.timeanddate.com/worldclock/timezone.html?n=179
When opening forex transactions, the actual value date is two days forward. A deal which is done on Monday is for Wednesday’s value. A deal done on Friday is for Tuesday’s value (Saturday and Sunday are not couted), and so on. Please note : On Wednesday the amount of swap is multiplied three times (tripled) to compensate weekend holidays which swap is not charged.
How to Calculate Swap:
Traders will earn positive swap if the currency bought has greater swap rate than borrowed one.
Example :
USD/JPY Pair. USD Swap Rate = 5.25% , JPY Swap Rate = 0.5%
Buy USD/JPY means a trader is buying USD by borrowing JPY. Since bought currency’s swap rate (USD) is greater than borrowed currency’s swap rate (JPY), the trader will earn interest income : 5.25% - 0.5% = 4.75% When a trader Sell USD/JPY (means borrowing USD to buy JPY), the trader will be charged by interest fee : -5.25% + 0.5% = -4.75%
Example 2:
EUR/USD Pair. EUR Swap Rate = 3.75%, USD Swap Rate = 5.25%
Buy EUR/USD means a trader is buying EUR by borrowing USD. Since bought currency’s swap rate (EUR) is smaller than borrowed currency’s swap rate (USD), the trader will be charged by interest fee : 3.75% - 5.25% = -1.5% When a trader Sell EUR/USD (means borrowing EUR to buy USD), the trader will earn interest income : -3.75% + 5.25% = 1.5%
Forex Broker usually provides a list of daily swap rates for every currency pairs available. Traders could find interest fee / earning based on Buy or Sell positions they will trade. (swap is usually in $ or pips value). If the swap value is quantified in pips, traders need to convert pip to dollar by calculating pip value of corresponding currency pair.
At the image above, we can see that by holding Buy GBP/USD for more than 1 day, a trader will earn $12.81/day (Standard Lot). To check swap rate for a specific currency at MetaTrader Platform : Click right mouse button at forex quotes list => Symbols => Select desired currency pair => Properties
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