Transparent Forex Swap Rates
at Zevivo

The net interest return that a trader accumulates on a currency position held overnight is referred to as a swap charge or rollover interest in forex trading. This fee is charged when the trader borrows one currency to buy another, as part of forex trading.

When you hold a position past the daily rollover time (typically 00:00 server time), you are subject to interest based on the central bank rates of the two currencies involved. For instance, if you are buying EUR/USD, you are effectively borrowing in US dollars to buy euros. In doing so, you pay interest on the borrowed US dollars and earn interest on the euros bought.

The net swap fee is calculated on the interest rate differential between the two currencies. If the rate differential is positive after fees are applied, the trader earns the difference. If the outcome is negative, the trader pays the cost.

The gain or cost of holding a position overnight depends on several factors: the current interest rate differential between two currencies, currency pair price fluctuations, behaviour of the forward market, swap points of the counterparty, and the position of the liquidity provider in the market hierarchy.

When traders open a long or short trading position, they commit to making the final payments on the 'value date'. The settlement is carried out within two working days in the spot market. When the trading position remains open and is rolled over to the next day, the value date shifts to a day ahead.

The trade's corresponding currency volume is borrowed and lent from the interbank market, subject to the current credit interest and deposit rates. The trading broker transfers the lending gains and borrowing costs to the trader. There are two cases: the swap is credited to or debited from the trader's account while the position is left with the previous price, or the position gets re-opened automatically at a new price at a new value date, adjusted to the swap rate.

To calculate the Forex rollover rates: subtract the interest rate of the base currency from the interest rate of the quote currency, then divide that amount by 365 times the base exchange rate.

For instance, you would like to trade the EUR/USD pair. Let's suppose the European Central Bank's (ECB) benchmark interest rate is 2.25%, while the US Federal Reserve's (Fed) is 4.50%. The interest rate of the currency you are buying (EUR: 2.25%) is lower than the currency you are selling (USD: 4.50%). So, storage will be deducted from your trading account. When your long position is rolled over to the next day, approximately US$7.62 will be deducted from your trading account per standard lot.

Swap charges are important for traders who want to open and hold long-term positions. This includes swing and position traders, hedging investors, those who trade highly volatile instruments, as well as individuals who trade on weekends and holidays. Carry traders base their strategies on the interest rate differential between two currencies, so swap fees are vital to their strategy execution.

Forex swaps are also crucial for hedging purposes. Suppose a trader opens a position expecting a specific type of market movement that hasn't begun yet. They may consider opening another position in the opposite direction without closing the first one — this is called 'lock mode hedging'. Low swap rates can help minimise the cost of maintaining such positions. The MT5 platform allows the implementation of such hedging strategies.

It should be noted that swaps can change daily depending on market fluctuations, central bank interest rates, and broker policies. Traders who are not familiar with swap charges may face unexpected trading costs, so monitoring swap rates is advised to mitigate risks.

To review Zevivo's latest swap rates on your MT5 account, follow these steps:

1. Go to the 'Market Watch' section in MT5
2. Right-click to select 'Symbols'
3. Choose the forex pair you want to trade
4. Click on 'Specification' for the pair
5. Information on the pair, such as forex swap rate, stop level, initial margin and more, will be displayed