Swap: The hidden cost that traders must not overlook

AirdropHunterWang · 2026-02-24T22:14:43+00:00

The essay discusses the often-overlooked trading cost known as swap, which can impact profits for traders holding positions overnight. It explains the concept of swap, its connection to interest rate differentials, types of swaps, and how to check and calculate these costs using trading platforms.

AirdropHunterWang

2026-02-24 22:14:43

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When it comes to trading costs, most traders immediately think of the spread or commission. But there’s another cost often overlooked, especially by beginners: swap, which quietly eats into your profits when you hold a position overnight.

What exactly is a swap?

Swap isn’t just a fee set by brokers. It’s the difference in “policy rates” between the assets you’re trading.

When you open a forex position, like Buy EUR/USD, you’re essentially “borrowing” dollars to “buy” euros. Central banks (like the FED for USD and ECB for EUR) set interest rates for their currencies. If you go long EUR/USD, you’ll earn interest on euros but pay interest on dollars.

Difference in interest rates = your swap

For example: If EUR has an interest rate of 4.0% per year and USD has 5.0% per year, you’ll pay a negative swap of -1.0% annually. Conversely, if you sell EUR/USD, you’ll receive a positive swap. It’s important to note that brokers often add their own “handling fee” into the swap rate, so the actual amount you receive or pay may differ.

Types of swaps you need to know

Type	Meaning	Effect
Positive Swap (+)	You earn money in your account	Good for carry trades
Negative Swap (-)	You pay money	Costs every night
Swap Long	For buy orders	Depends on interest rate differences
Swap Short	For sell orders	Usually less than Swap Long
3-Day Swap	Calculated three times (usually on Wednesdays)	Heavier charges

Why is there a 3-Day Swap? Forex markets are closed on Saturday and Sunday, but interest continues to accrue daily. Brokers consolidate the swap charges for the weekend into the trading day (mostly Wednesday). So, holding a position over the weekend can result in a 3x swap charge.

How to view and calculate swaps

Step 1: Find the swap rates

On MT4/MT5:

Go to Market Watch
Right-click → Specification
Look for “Swap Long” and “Swap Short”

On newer platforms: Many brokers display this as “overnight fee” in percentage per night.

Step 2: Calculate the actual cost

Method 1: If shown in points (MT4/MT5)

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