forex desk
Swap is the interest adjustment applied when a position crosses the daily rollover. In theory it reflects the rate differential between two currencies. In practice it reflects that differential plus a markup the broker sets, and the markup is often big enough that both directions of the same pair cost money.
Both sides negative is the tell
If long and short in one pair are both charged, the rate differential is not what you are paying. You are paying a financing markup twice, and the gap between the two published numbers is a fair estimate of its size.
| Holding | Charge per lot per night | 30 nights | Share of a 5,000 account |
|---|---|---|---|
| 1 lot | 6 units | 180 | 3.6 per cent |
| 0.5 lot | 3 units | 90 | 1.8 per cent |
| 1 lot including triple day | 6 plus two extra nights | about 204 | 4.1 per cent |
A swing trader holding one lot for a month can pay several per cent of the account in financing alone. That is a strategy-level cost, and it never appears as a line item until it has already been taken.
Triple swap day
Most brokers charge three nights of financing on one weekday to cover the weekend, usually Wednesday for FX. If your holding period routinely crosses that day, your real cost is materially higher than a nightly figure suggests.
Where it turns into a trap
- 01Carry trade marketing quoting a positive swap that the broker markup has already eliminated.
- 02Swap free accounts that replace financing with a flat daily administration fee, sometimes larger.
- 03Exotic pairs where the nightly charge exceeds the average daily range of the instrument.
A position that is flat after three weeks has not broken even. It has paid three weeks of financing.
Written by Aram Latifi. Ex-quant developer, now writing about the plumbing of retail trading. No affiliate links on this site.
