Rollover (Swap)

How Rollover Works in Practice

In the forex spot market, every trade theoretically settles in two business days (T+2). When you hold a position overnight, you’re essentially extending that settlement. The broker rolls your position forward: it closes today’s settlement and opens a new one for tomorrow, reflecting the overnight interest rate difference between the two currencies.

This interest rate differential is the rollover rate — also called the swap rate or overnight swap. If you’re long a currency with a higher interest rate and short a currency with a lower rate, you receive a positive swap (daily income). If you’re long the lower-rate currency and short the higher-rate one, you pay a negative swap (daily cost).

The rollover occurs automatically at 5:00 PM New York time (22:00 GMT). If you close a position before this cutoff, no rollover applies.

The Calculation Behind Rollover Rates

The swap rate is derived from the interest rate differential minus the broker’s markup:

Daily Swap = (Interest Rate Currency A - Interest Rate Currency B) / 360 × Trade Size

For a 1 standard lot (100,000 units) long AUD/JPY with AUD rates at 4.25% and JPY rates at 0.10%:

• Differential: 4.25% - 0.10% = 4.15%
• Daily swap: (4.15% / 360) × 100,000 ≈ $11.53/day (credited)

This $11.53 daily credit is the foundation of carry trade strategies. Held 365 days, this single position generates approximately $4,200 in swap income — independent of whether the pair moves up or down.

However, brokers don’t pass through the full interbank swap rate. They add a markup (typically 0.5-2% annualized) on each side, which is how they earn revenue from carry traders. The actual swap rate shown in your platform reflects this markup.

Triple Rollover on Wednesdays

Forex settlement operates on a T+2 basis but excludes weekends. To account for Saturday and Sunday, the broker applies triple rollover on Wednesday night — three days’ worth of swap (for Wednesday, Saturday, and Sunday) is credited or debited when the position rolls from Wednesday to Thursday.

This matters practically: traders holding negative-swap positions should be especially aware of Wednesday rollovers, as the triple charge can be a meaningful debit. Traders long carry positions benefit from the triple credit.

Some traders specifically open carry positions before Wednesday’s cutoff to capture triple rollover, then close after — a strategy called “rollover trading” or “swap hunting.” Its effectiveness is limited by spread costs and the relatively small daily swap values on most pairs.

Reading Swap Rates on Your Platform

In MetaTrader 4/5, swap rates are displayed in the Market Watch section (right-click on a pair → Specification). Two rates are shown:

• Swap long: Rate applied to buy positions
• Swap short: Rate applied to sell positions

Rates are quoted in the quote currency or in points (pips). Positive values mean you receive the swap; negative values mean you pay. These rates update periodically as central bank rates change.

Before holding a position overnight, always check the swap rate. On exotic pairs, negative swaps can be substantial — sometimes 5-20+ pips per night — which can erode a profitable swing trade’s gains significantly.

When Rollover Significantly Impacts Trading

Carry traders: Rollover is the primary source of income. Position selection, pair choice, and timing around central bank rate changes are designed entirely around maximizing positive swap accumulation.

Swing and position traders: A 3-week hold on a pair with a -5 pip/night negative swap costs 105 pips in rollover alone. This must be factored into profit targets.

Day traders: No rollover applies if positions are closed before 5:00 PM New York. This is one reason day traders avoid the complexity of swap calculations entirely.

Positions held over weekends: Triple rollover on Wednesday covers weekend days. No additional rollover applies on the weekend itself, but price gaps at the Sunday open create a separate risk.

Key Takeaways

• Rollover is the daily interest credit or debit for holding a forex position overnight past 5:00 PM New York time
• Positive rollover (carry) is received when long the higher-yielding currency in a pair
• Triple rollover is applied on Wednesday nights to cover Saturday and Sunday
• Check swap rates in MetaTrader’s Market Watch before holding exotic pairs overnight
• Swing traders must include negative swap costs in their profit target calculations

FAQ

Are rollover rates the same at all brokers? No. Each broker applies their own markup to the interbank swap rate. Comparing rollover rates across brokers is worthwhile if you’re running a carry-heavy strategy — the difference can add up to thousands of dollars annually on larger positions.

Does rollover apply to same-day trades? No. If you open and close a position before the 5:00 PM New York cutoff, there is no rollover. The charge or credit only applies to positions that remain open past the daily cutoff time.