Matthew Davis

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What is overnight swap in forex and why is it charged?

An overnight swap, also known as rollover, is the interest cost paid or received for holding a position overnight. It is based on the interest rate differential between the two currencies in a pair. If the base currency has a higher interest rate than the quote currency, traders may earn positive swap; if lower, they pay negative swap. Brokers calculate swaps daily, usually at the end of the trading day (5 PM New York time). Swaps can affect long-term strategies such as carry trades. Traders should check their broker’s swap rates and factor them into strategy planning.