What Is an Overnight Swap? Why Your Balance Changes Even When You Did Nothing
You open your account the next day. You didn’t open or close a single trade yesterday, yet the balance is different from last night.
Did the system make a mistake?
It’s not a system error. It’s the overnight swap.
This is part six of MASQuant’s “Trading Academy · Beginner Essentials” series. The first five parts covered things that happen the moment you place an order: contract specifications, lot size, leverage, where to put your stop loss, and the spread. This one covers a cost that only appears after a trade is held overnight.
The short answer
Whenever a position crosses midnight, the platform settles an overnight swap. It has nothing to do with profit or loss — if you hold, you pay (or receive).
Day traders rarely run into it; strategies that hold overnight or over the weekend need to count it as a real cost.
What is an overnight swap?
Whenever your position crosses the platform’s daily settlement time (usually around midnight), the platform settles a fee called a swap. You’ll also see it called an overnight fee, swap fee or rollover fee — they all mean the same thing.
Unlike the spread, which you pay once the moment you enter, the swap is settled once every time you cross midnight. The longer you hold, the more times it is settled.
Why does this fee exist?
Leveraged products such as CFDs and forex essentially use borrowed money to enlarge your position — you only put up part of the value as margin, and leverage carries the rest of the exposure (we broke down how leverage works in part three).
Holding overnight means using that borrowed money for one more day, so there is a funding cost. For forex, this cost mainly comes from the interest rate difference between the two currencies; for CFDs on shares, indices and commodities, it’s the difference between the holding cost (funding interest) and any yield from the instrument itself (such as index dividends).
It doesn’t always go against you
This is the most commonly misunderstood part: the overnight swap is not always a charge.
Whether a long or short position pays or receives depends on the interest rate structure at the time and the nature of the instrument:
- If the currency you’re long has a higher interest rate than the currency you’re short, you’ll usually receive swap; the other way around, you pay.
- CFDs on shares, indices and commodities follow the same logic — whichever is higher, the funding interest or the instrument’s own yield, decides whether you pay or receive.
Whether you pay or receive, and how much, differs for every instrument and changes with market interest rates. Check before you trade — don’t assume it’s always a charge.
The direction of the swap can change. For the same instrument at a different time, paying and receiving can flip — it isn’t a fixed rule, it’s a number you need to check every time.
A simple example
(These numbers are for illustration only, not real market prices or rates)
Suppose an instrument's swap is −5 per night (you pay)
Held for 10 days:
5 × 10 days = 50These 50 have nothing to do with how much the trade finally makes or loses — as long as you hold it overnight, it gets settled. Winning trades pay it, and losing trades pay (or receive) it too.
Triple swap: usually on Wednesday
Most platforms charge a triple swap on one day, most commonly Wednesday.
The reason is that forex spot trades conventionally settle two business days later: a position open on Wednesday would normally settle over the weekend, when markets are closed. To settle the weekend’s two days in one go, the platform books three days of swap on Wednesday.
Which day the triple swap falls on depends on the platform and the instrument’s specifications. It isn’t the same everywhere — checking the instrument’s specifications before you trade is the most reliable way.
When you’ll hardly ever see it: day trading
If you day trade — closing your positions before the session ends — you’ll almost never pay swap, because your positions never cross the midnight settlement time.
The swap affects styles that hold overnight, or even over the weekend: the longer you hold, the more times it is settled and the more it adds up.
Common mistakes
1. Counting the spread but not the swap
Part five explained that the spread is a cost you pay on every trade. But if your strategy holds for days or weeks, counting only the spread isn’t enough — many people hold for two weeks and only then discover the swap has added up to more than they expected.
2. Assuming the swap is always a charge
As mentioned above, the direction depends on the instrument and the interest rate structure; it isn’t always a loss. If you assume it always costs you, you may miss money you would actually receive, or underestimate the real cost of long holds — neither assumption is accurate. Checking the actual number is.
Check the swap in MT5 before you trade
- Find the instrument in the Market Watch window (shortcut Ctrl+M), right-click and choose Specification.
- The specification lists Swap long (swap for long positions) and Swap short (swap for short positions) — a positive number means you receive, a negative number means you pay.
- The same page shows the calculation method (usually points or percentage) and which day the triple swap is charged (3-day swap).
- The numbers differ by instrument and account type, so check once before holding overnight.
FAQ
What is an overnight swap?
Whenever a position crosses the platform’s daily settlement time, a fee is settled — also called a swap fee or rollover fee. It is the funding cost of using borrowed money to enlarge a leveraged position and holding it overnight, settled once each time you cross midnight.
Is the overnight swap always a charge?
No. The direction depends on the instrument and the interest rate structure: for forex it’s the rate difference between the two currencies; for CFDs on shares, indices and commodities it’s the difference between funding interest and the instrument’s own yield. Whichever is higher decides whether you pay or receive — check the instrument’s specifications for the actual numbers.
Why is the triple swap often charged on Wednesday?
Forex spot trades conventionally settle two business days later. A position open on Wednesday would normally settle over the weekend when markets are closed, so to cover the weekend’s two days at once, the platform books three days of swap on Wednesday. Which day it falls on varies by platform and instrument specification.
Do day traders need to worry about the swap?
Hardly. Day traders close their positions before the session ends, so their positions don’t cross the midnight settlement time and no swap is charged. The fee mainly affects styles that hold overnight or over the weekend.
How do I check the swap in MT5?
Find the instrument in Market Watch (Ctrl+M), right-click and choose Specification. It lists the Swap long and Swap short values, plus which day the triple swap is charged (3-day swap).
Final thoughts
Part one said check the specifications first, part two said calculate your lot size first, part three said margin is not a stop loss, part four said put your stop where you’d be proven wrong, and part five said it’s normal to be negative the moment you enter. This part covers what happens only after a trade is held overnight: the swap.
It has nothing to do with profit or loss — hold it, and it gets settled. Day traders barely notice it; once your strategy holds overnight or over the weekend, this fee has to be counted as a real cost.
Remember it this way: day traders barely notice the swap; if you hold overnight or over the weekend, count it as a real cost.
Risk disclosure: CFDs are high-risk financial products and can lead to rapid loss of capital. Past performance does not guarantee future results. All strategies and backtests are for reference only and do not constitute investment advice. The actual direction, amount and timing of swaps vary by platform, instrument and account type, and change with market interest rates. Please read our Risk Disclosure carefully before trading.
Further reading:
- How Much Is 1 Lot? What the “1” in Your Order Box Actually Means
- How to Calculate Lot Size? With the Same $10,000, Gold and EUR/USD Can Differ by 6.7x
- What Is 100:1 Leverage? It Does Not Make You 100x More Money, It Lets You Carry More
- How to Set a Stop Loss? It Is Not How Much You Can Lose, It Is Where You Are Wrong
