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<p>In forex trading, a swap is the interest rate differential between the two currencies of the pair you are trading. When you hold a position overnight, you will either earn or pay the difference in interest rates between the two currencies, depending on the direction of your trade. This is known as a "swap" or "rollover" and it is typically a small, but potentially significant, cost or credit that is applied to your account each night.</p>
<p id="isPasted">A forex swap is essentially a currency exchange transaction between two parties, where both parties agree to exchange a specific amount of one currency for another currency, at a specified exchange rate, and then reverse the transaction at a later date. The key difference from a regular currency exchange is that in a forex swap, the two parties also agree to exchange the interest rate differential associated with the two currencies for the duration of the swap. This means that the parties will pay or receive the difference in interest on the amount of currency they have borrowed or lent. …</p>
<p>If a trader holds a position open overnight, the swap charge is imposed on trade by the broker for that open position. The swap rate is fixed or determined by the parties involved in forex trading. Swap long is charged for a buy trade and Swap short is charged for a sell trade. Swap charges are sometimes credited to the trader's account as well depending upon the currency pair one is dealing in.</p>
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