Swap in forex: The Invisible Fee That Affects Your Return

Have you ever wondered why you lose money just by leaving a position open overnight? Welcome to the world of forex swaps, that silent fee many traders ignore until it hits their wallet.

What the Hell is a Swap?

Simple: when you buy a coin, you’re borrowing one currency and selling another. The interest rates of both are not the same, so someone has to pay the difference. That someone is you (or sometimes, you earn ).

• Positive Swap: You earn money for leaving the position open. Happens when the basis coin has a better interest rate.
• Negative Swap: You lose money every night. The basis coin has a lower rate than the counterparty.

How is (Calculated Without Headaches)

The formula is basic:

Fee = Position Size × Rate Difference × Broker Markup

Real example: You buy EUR/USD with 1 lot (100,000 EUR) and leave it for 30 days. If the EUR yields 4% annually and USD 2%, you lose about 5-6 USD each night in negative swap.

Real-Life Cases

Scenario 1 - Profit: You buy EUR/USD. The ECB maintains high rates while the Fed is more cautious → you receive positive swap each night. It’s like the market pays you to wait.

Scenario 2 - Loss: You buy GBP/JPY. The Bank of Japan is in a low-rate crisis → you pay hefty negative swap. Bad for your balance.

Factors Moving Swaps

1. Central Bank Decisions: The Fed or ECB raise/lower rates → all swaps change automatically.
2. Market Volatility: When chaos erupts, brokers widen their margins.
3. Major vs Exotic Pairs: EUR/USD has low swap. AUD/JPY can give wild rates.

Tricks to Avoid Bleeding Money

• Close before rollover: Swaps apply at 5:00 PM EST. Close before if you can.
• Use Islamic accounts: Some brokers offer swap-free accounts (believe it or not).
• Choose pairs with positive swap: Look for rate differences in your favor.
• Watch Wednesday: That day, brokers charge triple to compensate for the weekend. Avoid holding positions overnight.

Wednesday = Punishment Day

Every Friday, the system closes, so on Wednesday, brokers charge triple swap to cover Thursday-Friday. It’s a drip of money that almost no one sees coming.

The Good and The Bad

✅ Advantages:

• Positive swaps = passive income on long positions.
• Shows the real economic health of currencies.

❌ Disadvantages:

• Negative swaps slowly erode profits.
• Confusing variable for beginner traders.
• Over time, adds up to millions in accumulated losses.

Questions You’ll Ask Yourself

When does the swap apply? → 5:00 PM EST, every business day.

Does it affect my day trading much? → Almost not. Your enemy is the swap if you leave positions open overnight.

Is it the same across all brokers? → No. Each broker sets different rates. Compare before choosing.

Do all currencies have swaps? → Yes, but they vary wildly. Major vs exotic pairs are like heaven vs hell.

Closing

Swaps won’t ruin you if you understand them. Just don’t be naive and leave EUR/JPY positions open for weeks waiting for a miracle. Do the math, understand the real cost, and adjust your strategy. Professionals automate it. Now you also know.