Swap / Rollover

Swap or rollover is the interest rate differential applied to an open position when held overnight into the next trading day. This rate can either be credited to or debited from the trader's account, depending on the interest rate spread between the two currencies being traded.

How It Is Calculated: The amount depends on the interest rate differential between the two currencies in the traded pair, the direction of the trade (long or short), and the position size. It is typically applied at the close of the daily trading session, with the rate usually tripled on Wednesday to account for the weekend.

Importance for Traders:

• Affects the overall cost or return of holding open positions over extended periods.
• A vital consideration in long-term trading strategies compared to fast-paced day trading.
• Some platforms offer swap-free accounts to comply with Islamic (Sharia) principles.

Common Mistakes:

• Overlooking its cumulative impact when holding positions for the long term.
• Assuming it is always a fee charged, whereas it can sometimes be an interest credit paid into the trader's account.
• Failing to check the swap rates before opening trades intended to be held for several days.

Traders are advised to review the swap value for each financial instrument before deciding to hold a trade beyond a single trading day.

How It Is Calculated on the EVEST Platform: EVEST clearly displays the swap value for each instrument within the contract specifications before opening a trade. This fee or credit is applied automatically when an open position is rolled over to the next day, with the rate typically tripled on Wednesdays to cover the weekend.

When It Has the Greatest Impact: The impact of swap becomes particularly noticeable in medium- to long-term positions left open for several days or weeks, while having negligible effect on day traders who close their positions before the end of the trading day.

Risks: Swap can turn into a substantial cumulative cost if not accounted for in long-term trades, occasionally turning an ostensibly profitable trade into a net loss once accrued daily charges are deducted.

Additional Common Mistakes: Some traders neglect to verify swap rates before entering long-term trades on EVEST, while others mistakenly assume swap is always a deduction, failing to realize it depends on trade direction and the traded asset.

Relationship to Risk Management: Financing costs must be factored into the total cost calculation of any long-term trading strategy. The informational tools available on EVEST assist traders in estimating this expense in advance, ensuring it aligns with target profit levels and the acceptable risk-reward profile for each trade.