In plain English
What Swap rate means
When a forex trade stays open past the daily cutoff, the broker may add or subtract a swap charge. This adjustment is tied to the relative interest rates of the two currencies and to how the broker computes financing. It is a trading cost, not a separate market prediction.
Why it matters
Swap rates can materially affect results for swing or position traders. A trade with a favorable price move may still lose money after overnight financing, while a position held in the opposite direction may earn a small credit. Understanding swap helps compare holding costs across pairs and brokers.
Example
Suppose a trader holds a long position in a higher-yielding currency against a lower-yielding one and receives a small daily credit. If the position is held for three nights, the total credit is the daily amount multiplied by three, subject to weekend conventions and broker adjustments.
Quick answers
Common questions
Is swap rate the same as rollover?+
They are closely related. Rollover is the process; the swap rate is the financing amount posted because of it.
Can swap rate be positive?+
Yes. Depending on the currencies and pricing, the adjustment can be a credit or a debit.
Sources