A swap, also known as “rollover fee”, is charged when you keep a position open overnight. A swap is the interest rate differential between the two currencies of the pair you are trading.
It is calculated according to whether your position is long or short.
Here’s the formula to calculate swap:
Swap = Point Value * Swap Rate * Number of Nights
Example:
Trading 2 lot AUDUSD Long with an account denominated in USD. Trade opened on Monday and left overnight for Tuesday.
Swap rate for the date = -5.47
Point value of AUDUSD for 2 lots trade = 0.00001 * 100,000 * 2= $2
Swap = 2 * -5.47 * 1 = -10.94 USD
Thus, trader will be charged 10.94 USD for keeping position open overnight from Monday to Tuesday.
Swaps rates are normally updated on daily basis. There is one special day for rollover – Wednesday.
Suppose you decide to keep the position open overnight after the Wednesday session is finished. In that case, the swap will be multiplied by three to account for rolling over the weekend when the Forex market is not working.
The triple Swap, or 3-day Swap, happens on Wednesday because most instruments need two business days to be settled (for all the financial transactions to be completed). So, if you open a position on Wednesday, it will be settled on Friday. If you roll the Wednesday position over to Thursday, the Swap rate will also account for rolling the position over the weekend – thus the triple rate.
To view swap rates in MetaTrader 5 Desktop terminal:
- Locate Market Watch window (menu ‘View’ > ‘Market Watch’ > ‘Symbols’)
- Select the currency pair
- Right mouse button click and select ‘Specification’ in popup menu.