A swap rate is essentially a debit or credit paid or earned as a reflection of the varying interest rates applicable to currency pairs. When trading the USD/JPY for example, swap interest rates will be determined based on the interest rates of the countries being represented by this pair.
Depending on whether you are long or short and which country has higher interest rates, you may be charged or credited interest. In essence, when a trader holds a position over night they are subject to the interest rates applicable to the currency pair they are trading. 'Swap' is also commonly referred to as a 'rollover rate'.
Swap rates are calculated daily at 4:59 pm New York time. Trades that have been opened before 4:59 pm New York time and held open past this time will be subject to swap rates. Swap rates are tripled on Wednesday at 4:59 pm New York time.
When placing a trade in the spot Forex market, the actual value date is two days forward. A deal done on Thursday is for value Monday. A deal done on Friday is for value Tuesday, and so on. On Wednesday, the amount of swap is tripled in order to compensate for the following weekend (during which time swap is not charged because trading is stopped for the weekend).
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Swap rates below are based on
$100,000 USD standard lot as base currency
Current swap rate * base currency price at
the time swap is charged * lot size = swap debit/credit
-2.13 * 1.5953 (current price GBP) *
1 (standard lot) = -3.397989, rounded down to -3.40
Mini Account Swap Rates are 1/10 the size of the Standard Account Swap Rates.
*Forex trading is one of the riskiest forms of investment available and may not be suitable for all traders.
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