How it works
Every forex pair has two underlying interest rates, one per currency. Hold a position past the broker’s daily cutoff (5pm New York for most venues) and the position rolls over to the next trading day. You earn interest on the currency you bought and pay interest on the currency you sold. The net is the swap, credited or debited to your account.
Example
You go long AUD/JPY. AUD pays about 4.35 percent overnight, JPY pays about 0.25 percent. The differential is 4.10 percent in your favor before broker markup. On a standard lot worth roughly $66,000 of AUD exposure, the daily swap credit is around $7. Hold for a month and you collect about $210 in swap, on top of any price move. Now reverse: go short AUD/JPY and you pay that swap.
Triple-swap Wednesday
Forex settles T+2. A position held past Wednesday’s cutoff settles after the weekend, so brokers charge or pay three days of swap in one go. Wednesday swap is roughly triple. If you only check swap occasionally, check it on a Wednesday.
Why it matters
Swap is a cost or a yield depending on direction. Carry traders pick pairs where the differential pays them to hold. Scalpers who never hold overnight ignore swap entirely. Swing traders need to factor swap into the expected return of a multi-day position, or it quietly erodes the edge.
