Swap – Overnight Rollover Interest; What exactly do these terms mean, how and when are they charged to my account?
Getting into too much detail based on these terms can be a headache when trying to grasp a deep understanding of the “why” factor. The important aspect is understanding what it is and when it is imposed (earned or paid). Your broker will specify the rate that is paid or earned on an open position. It will be indicated on a full contract size and then adjusted to your position size accordingly.
Swap or Overnight Rollover is an interest paid or earned for holding a position “overnight”. Note that the exact time for each individual asset will be indicated by your broker. The amount will also be indicated by your broker and the actual debit or credit will be calculated according to your position size. The swap is an interest calculation. Whether you are credited or debited depends on a few factors but not limited to being long or short.
The most important concept to grasp is the why factor. In simple terms, swaps are charged for the privilege of borrowing money from your broker, allowing you to open bigger positions than your balance would allow.
Swap rates are not fixed and are updated frequently. There are even strategies based purely on open positions which will yield positive swaps. If you are a daytrader, swaps should not be of much concern.