Swing and position trading
The cost of keeping a position open overnight
When you hold a trade past the daily cut-off time, your broker charges a swap fee. This fee is based on the interest rate difference between the two currencies in the pair. For EUR/USD, you are borrowing euros to buy dollars, or the other way around. The swap is calculated on the full position size and is charged for each night you hold.
The swap rate is not fixed. It changes daily with interest rates and market conditions. Your broker will show the current swap rates in the contract specification. For EUR/USD, the swap might be positive or negative. A positive swap means you earn money for holding; a negative swap means you pay. Most retail traders pay, because the broker adds a markup.
On EUR/USD at 1.0850, one pip on one standard lot is worth 10 units of the quote currency. In naira terms, that is about ₦16,500 per pip. If the swap is ₦16,500 per night, that is one pip per night. Over five nights, that is five pips. If your target is 30 pips, the swap eats into your profit. The swap is charged in the quote currency, so your account currency conversion may add another cost.
How weekends and holidays change the swap count
The forex market is open from Sunday evening to Friday evening. When you hold a position over the weekend, you are charged swap for the days the market is closed. Most brokers charge triple swap on Wednesdays to cover the weekend. That means if you hold from Wednesday to Thursday, you pay three nights of swap instead of one. This can catch you out if you plan to hold over a weekend.
Public holidays also affect swap charges. If a holiday falls on a weekday, the market may be closed, and the swap for that day is usually charged on the previous trading day. For example, if Monday is a holiday, the swap for Monday might be charged on Friday, along with the weekend swap. That can mean four nights of swap charged at once. Always check the broker's holiday schedule.
The total swap cost for a multi-day trade is not just the number of calendar days. It is the number of rollover points. A trade opened on Monday and closed on Friday will have four rollovers: Monday to Tuesday, Tuesday to Wednesday, Wednesday to Thursday (which may include triple swap), and Thursday to Friday. That is at least four nights, but possibly six if the Wednesday triple applies. The exact count depends on the broker's policy.
Comparing swap cost to the expected price move
Before you decide to hold a trade for days or weeks, you must compare the swap cost to the potential profit. If the swap is ₦16,500 per night and you expect a 30 pip move, that is ₦495,000 gross. Over five nights, swap is ₦82,500, leaving ₦412,500 net before spread. But if you expect only a 10 pip move, gross is ₦165,000, and swap over five nights is ₦82,500, leaving ₦82,500. The spread will reduce that further.
The spread is charged once when you open and once when you close, but it is built into the price. For EUR/USD, the spread might be 1 pip, so you start with a 1 pip loss. That is ₦16,500. If you hold for five nights, total costs are spread (₦16,500) plus swap (₦82,500) = ₦99,000. Your gross profit must exceed that to be net positive. If your target is 30 pips, net profit is ₦495,000 - ₦99,000 = ₦396,000.
The key is to work out the swap for the whole holding period before you enter. If the expected move is small, the swap may turn a winning trade into a losing one. You can use the contract specification to find the swap rate per night. Multiply by the number of nights you expect to hold, including weekends and holidays. Then subtract that from your expected gross profit. If the result is too small or negative, the trade is not worth holding.
Four days on EUR/USD: the swap takes ₦49,500
| Step | Amount | Note |
|---|---|---|
| Instrument and price | EUR/USD at 1.0850 | The example rate used throughout this lesson. |
| Position size | 1 standard lot | One standard lot is 100,000 units of the base currency. |
| Value of one pip | 10 units of the quote currency | 100,000 x 0.0001 = 10. At 1.0850, that is about ₦16,500 per pip. |
| Price move over four days | 20 pips in your favour | A modest move for a multi-day hold. |
| Gross profit | ₦330,000 | 20 pips x ₦16,500 per pip. |
| Swap per night | ₦16,500 | One pip equivalent per night, charged when the position rolls over. |
| Nights held | 3 | Four days means three overnight rollovers. |
| Total swap | ₦49,500 | 3 nights x ₦16,500. |
| Net profit before spread | ₦280,500 | ₦330,000 gross minus ₦49,500 swap. |
| Spread cost | varies by broker | Charged once on entry and once on exit; the amount depends on the broker and the session. |
The broker may round the swap, charge a wider swap on Wednesdays, or quote a different spread at the open and close. Check the contract specification before you hold overnight.
Doing it once, step by step
Follow these steps to calculate the swap cost for a multi-day trade and decide if it is worth holding. Use the contract specification from your broker.
- 01
Find the swap rate per night
Look in your trading platform or ask your broker for the contract specification. The swap rate is usually shown as a percentage or in points. For EUR/USD, it might be -0.5 points per night. Convert that to naira using the pip value. If one pip is ₦16,500, then 0.5 points is ₦8,250.
- 02
Count the number of nights
Count each night you will hold the trade. Remember that a weekend adds two or three nights. A Wednesday rollover often adds triple swap. Check the broker's holiday schedule for any extra charges. For a trade from Monday to Friday, you might have four nights, but if Wednesday triple applies, it could be six.
- 03
Multiply swap rate by nights
Multiply the swap per night in naira by the number of nights. For example, ₦16,500 per night times 4 nights equals ₦66,000. If the swap rate changes, use the current rate from the specification. This gives you the total swap cost.
- 04
Work out the gross profit from your target
Decide how many pips you expect the price to move. Multiply by the pip value in naira. For 30 pips at ₦16,500 per pip, gross profit is ₦495,000. This is before any costs.
- 05
Subtract swap and spread
Subtract the total swap cost from the gross profit. Also subtract the spread cost, which is typically one or two pips. For 30 pips gross, minus ₦66,000 swap and ₦16,500 spread, net profit is ₦412,500. If the net profit is too small or negative, do not hold the trade.
- 06
Check the contract specification in writing
If the swap rate is not clear, ask your broker for the contract specification in writing. The broker may round the swap, charge a wider swap on Wednesdays, or quote a different spread at the open and close. Check these details before you hold overnight.
The mistake most people make here
The common mistake is to plan a multi-day trade using only the spread and the price target. People forget that every night adds a swap charge, and that a weekend can add two or three nights at once. Instead, work out the swap for the whole holding period first. If the expected move is small, the swap may turn a winning trade into a losing one. If you cannot see the swap rate in your platform, ask the broker for the contract specification in writing.Check yourself
You hold a 1 standard lot EUR/USD trade for 5 days. The swap is ₦16,500 per night. How many nights are charged, and what is the total swap?
Five days means four overnight rollovers, so 4 nights are charged. 4 x ₦16,500 = ₦66,000.
The same trade makes 30 pips. One pip is worth ₦16,500. What is the gross profit, and what is the net profit after ₦66,000 of swap?
Gross profit is 30 x ₦16,500 = ₦495,000. Net profit before spread is ₦495,000 minus ₦66,000 = ₦429,000.
Why does a position held over a weekend usually cost more in swap than one held over a single weeknight?
Because the weekend covers more than one rollover. Brokers often charge for the days the market is closed, so a weekend can add two or three nights of swap at once.
Questions that come up next
How is the swap calculated for a multi-day trade?
The swap is charged for each rollover point, not each calendar day. A rollover happens when the trading day ends and positions are carried to the next day. Most brokers charge one swap per rollover, but some days may have multiple rollovers. The total swap is the number of rollovers multiplied by the swap rate per night. Always check the contract specification for the exact number of rollovers.
What happens if I hold over a public holiday?
When the market is closed for a public holiday, the swap for that day is usually charged on the previous trading day. This can mean an extra night of swap is added to the previous day's charge. For example, if Monday is a holiday, the swap for Monday may be charged on Friday. That can result in four nights of swap charged at once. Check the broker's holiday schedule to avoid surprises.
Can the swap be positive?
Yes, the swap can be positive or negative. A positive swap means you earn money for holding the position overnight. A negative swap means you pay. For most retail traders, the swap is negative because the broker adds a markup. The swap rate depends on the interest rate difference between the two currencies and the broker's markup. Check the contract specification for the current swap rates.
How does the swap affect my profit target?
The swap reduces your net profit. If you have a profit target of 30 pips and the swap is one pip per night, holding for five nights costs five pips. That leaves you with 25 pips of profit before spread. If the swap is larger, it can turn a winning trade into a losing one. Always calculate the total swap before setting your target.
What is the difference between swap and spread?
The spread is the difference between the buy and sell price, charged once when you open and once when you close. The swap is a fee for holding the position overnight, charged for each rollover. The spread is a cost per trade, while the swap is a cost per night. Both reduce your profit, but they are charged at different times.
How do I find the swap rate for my broker?
The swap rate is listed in the contract specification for each instrument. You can find it on your broker's website or trading platform. If it is not visible, ask your broker for the contract specification in writing. The swap rate can change daily, so check it before you hold a position overnight. Make sure you understand how your broker calculates the swap.
The words used on this page
- swap
- A fee charged for holding a trade overnight. It is based on the interest rate difference between the two currencies in the pair. The swap can be positive or negative, but for most retail traders it is a cost.
- rollover
- The point when the trading day ends and positions are carried to the next day. Each rollover may trigger a swap charge. The number of rollovers determines the total swap cost.
- pip
- The smallest price move in a currency pair. For EUR/USD, one pip is 0.0001. On one standard lot, one pip is worth 10 units of the quote currency, which is about ₦16,500 at 1.0850.
- standard lot
- A standard lot is 100,000 units of the base currency. For EUR/USD, one standard lot is 100,000 euros. The pip value and swap are calculated based on this size.
- contract specification
- A document from your broker that lists the details of a trading instrument. It includes the spread, swap rates, lot size, and other costs. You can ask your broker for it in writing.
- quote currency
- The second currency in a pair. For EUR/USD, the quote currency is USD. The pip value and swap are often calculated in the quote currency.
What to take away
- The swap is charged for each night you hold a trade, and weekends or holidays can add extra nights.
- Calculate the total swap for your planned holding period before you open the trade.
- A small profit target can be wiped out by swap costs, so check the numbers first.
- If the swap rate is not clear, ask your broker for the contract specification in writing.