Interest/Swap/Rollover Calculation

The currency market calculates interest on a daily basis. Interest/Swap/Rollover are different types of interest traders earn or incur for holding open positions for more than a day.

At the end of each trading day traders retain the incurred interest or receive income credited to their accounts.

When opening forex transactions, the actual date is two days ahead. A trade which is executed on Monday is for Wednesday’s value.

Whenever you keep a position open overnight a swap (also known as rollover) fee is charged. Swap is the interest rate differential between the two currencies in the pair that you are holding, and is calculated according to whether your position is long or short.


Rollover calculation:

Swap = (one pip / exchange rate) * trade size (lot size) * swap value in points

Example:

Trading 1 lot of EUR/USD (Short) with an account denominated in EUR.

One pip = 0.0001

Exchange rate = 1.35230

Short swap rate = -0.9

1 lot = 100,000

0.0001/1.35230 = 7.39480 * 0.9 (EUR/USD Swap short) = -6.65532 = 0.0001 *100,000 * (-0.9) / 1.3523 = -6.6553