Modified on: 21st November 2023
‘Swap’ is the term used to represent the interest that is received/given for keeping a trade open past end of day (5pm EST). Swap rates are derived from the interest rates of the central banks of the two currencies in a pair.
Swap short is when you keep a short position (Sell) open overnight. Swap Long is when you keep a long (Buy) position open overnight.
To calculate the swap fee, you can use the following formula:
Swap Long: One Point x Trade Size x Swap Long in Points
Swap Short: One Point x Trade Size x Swap Short in Points
Here are two examples to show how this calculation works. It will show how you can lose, but also gain money through swaps.
0.01 x 100 x 2.5272 = 2.53 USD
This means that you would receive $2.5272 in swap fees for keeping 1 lot short of XAUUSD past end of day.
0.00001 x 100,000 x -4.98 = -4.98 USD
This means you’d pay $4.98 in swaps for keeping 1 lot short of USDCAD past end of day.
If you are unsure of what the figures in the above equations are, or where they can be found, here is a short explanation on each:
One Point = 0.00001 in EURUSD as point is the last digit in the price
Trade Size = Lots * Contract Size = 100,000
Swap Long in Points = -4.98on a Long position on USDCAD
Something to note is that with pairs that close on weekends, there will be a triple swap charged. This is charged on a certain day, usually a Wednesday but in some cases can be another day, to make up for the 2 days that the market is closed.