Swap (Rollover)
What is swap in forex? The daily interest paid or earned for holding a position overnight, derived from the interest rate gap between the pair's two currencies.
Swap, also called rollover, is the interest you pay or receive for keeping an FX position open overnight. It exists because every currency position is implicitly a loan: holding one currency means financing it with the other. The daily settlement of that interest gap is the swap, and it is the mechanism that turns the interest rate differential into actual cash flow on your account.
How it works
Every pair has two interest rates behind it. Go long a pair and you hold the base currency (earning its rate) financed in the quote currency (paying its rate). If the rate you earn exceeds the rate you pay, swap is credited to you each night; if it is lower, it is charged. Brokers apply the charge at a daily cut-off (typically 5 PM New York time) and add their own markup, which is why the swap you receive is always a little worse than the raw differential suggests.
One quirk matters for anyone holding through midweek: because spot FX settles two business days later, the position held over Wednesday night settles over the weekend and books three days of swap at once.
A worked example
Suppose you are long one standard lot (100,000 units) of a pair whose base currency rate is 4.25% and quote currency rate is 0.25%: a gap of 4 percentage points in your favour. The raw daily carry is roughly 100,000 × 4% / 365 ≈ 11 dollars. After the broker's markup you might receive 8 to 9 dollars a night; on Wednesday, about triple that. Flip the position short and the same gap works against you: you now hold the low-yielding side and pay roughly that amount nightly. Over a six-week hold, the difference between the two directions is a few hundred dollars on a single lot, real money that never shows on the chart.
Common mistakes
The first mistake is ignoring swap on multi-week positions: a trade that is flat on price can be meaningfully up or down once forty nights of rollover are counted. The second is the reverse: chasing positive swap as if it were free income. The daily credit is small, and the exchange-rate risk on the position dwarfs it, which is the whole lesson of the carry trade. Check the actual swap rates your broker quotes rather than assuming the policy-rate gap; the markup differs per broker and per pair.
See it in the data
The interest rate differential table shows the current policy-rate gap for every major pair and a carry calculator that tells you which side earns swap before your broker's markup.