Swap fee: Hidden costs that traders need to be aware of

When it comes to trading costs, most traders only think of Spread and Commission. But there is another expense that beginner traders often overlook: Swap fee. Understanding this can help you plan your trades more effectively and avoid losing profits from hidden costs that are intangible but tangible.

Swap Fee: What Is It Really? Why Does It Exist?

Swap fee (Swap), also known as “Overnight Interest” or “Rollover Fee,” is a fee for holding a trading position overnight. Simply put, it is the interest that accrues when you keep an order open (beyond market close).

The reason for swap fees is more complex than it appears. It mainly stems from the “Interest Rate Differential” (Interest Rate Differential), especially in Forex trading.

When you trade currency pairs like EUR/USD, you are “borrowing” one currency to “buy” another. If you Buy EUR/USD, you will earn interest on EUR (that you buy) and pay interest on USD (that you borrow). The net difference between these two interest rates is called the swap.

Real Example

Suppose the end-of-year interest rates are 4.0% for EUR and 5.0% for USD:

• If you Buy EUR/USD: you earn 4.0% (EUR) but pay 5.0% (USD) = net difference of -1.0% (pay)
• If you Sell EUR/USD: you pay 4.0% (EUR) but receive 5.0% (USD) = net difference of +1.0% (receive)

However, brokers will add their own “handling fee,” making the actual rate you receive often different from the theoretical. Often, you may have to pay in both directions.

Types of Swap Fees You Should Know

Positive Swap (Swap Positive)

This occurs when you gain money into your portfolio every night you hold an order, happening when the interest of the asset you “buy” is significantly higher than what you “borrow.”

Negative Swap (Swap Negative)

The most common situation is you have to pay money out of your portfolio every night, occurring when the interest of the asset you “buy” is lower than what you “borrow.”

Swap Long and Swap Short

• Swap Long: Swap rate for Buy orders
• Swap Short: Swap rate for Sell orders

These two rates are never the same because brokers add their own spread and policies.

( 3-Day Swap Phenomenon )Triple Swap (

This is where beginner traders often make mistakes. Most Forex markets close on Saturday-Sunday, but interest continues daily. Therefore, brokers consolidate the swap fees for Saturday-Sunday into the trading day, usually on Wednesday night )or Friday in some brokers###.

This means if you hold an order from Wednesday to Thursday, you will be charged a 3x swap fee.

How to Check Swap Fees Before Trading

( For MT4/MT5 Platforms

1. Go to Market Watch
2. Right-click on the asset
3. Select Specification
4. Look for “Swap Long” and “Swap Short”
5. The numbers are usually shown in Points )must be calculated###

( For Other Platforms Most modern brokers display this information clearly on the asset info page. You can search for “Overnight Fee” )Overnight Fee### or “Interest Rate.”