How to calculate swap rates

September 19, 2019
by Nick Alexander, Market Analyst

Article Recap

Swap rates are issued by big financial institutions and are passed on to brokers before being applied to their trading services.

What is a Swap rate?

A swap rate (also known as rollover rate) can be applied when positions are kept open overnight. These rates are issued by financial institutions that brokers work with and then applied to the trading services of each company. All trades left open after midnight (platform time) will have the swap rate applied to them. Typically different brokers and platforms have slightly different rates and could apply the swap rates at a different time. Here is our guide on calculating swap rates.

Calculating Swap rates

Swap rates are calculated automatically by the trading platform, however, traders can calculate Forex swap rates themselves using the following formula:

For Forex pairs & Indices

Swap Rate x Lots (Volume) x Number of Nights = Swap (in base currency)

The first number that is required is the Swap rate itself. It can be either a positive or negative number that is based on interest rates. Swap rates are also different for long and short positions. So, if you placed a long position (buy) you will make the calculations with the Swap long rate and if you placed a short position (sell) you will use the Swap short rate.

Swap rates vary from asset to asset and are measured on a standard size of 1 standard lot (100,000 base units for Forex pairs). In order to make the necessary calculations traders need to check the updated rates for each instrument in their trading platform. If you use the most popular platform – MetaTrader 4 or MetaTrader 5, you need to go to the “Market Watch’’ section and right-click on the desired asset. From the drop-down menu select “Symbols”. A popup window will open with all available instruments and their specifications. If you are using Meta Trader 4 choose the one you want to check and click the “Properties” button – a new window will appear that shows the long and short swap rates, as well as the market closing times.

The instrument’s Swap rate

So, let’s suppose you are trading the AUD/USD Forex pair. In your trading platform, you can see that Swap long is – 4.38 and Swap short is 0.14. You opened a long position (BUY), so you will do the calculations with – 4.38.

Lots (Volume)

Next, we have Volume. When you place an order you can choose volume (number of lots) of the trade. You can select a number between the minimal and maximum volume available in your trading platform. In the case of AUD/USD, this number ranges from 0.01 and 40.
So, let’s say the trade in was 2 lots. (is this compete?)

Triple swap

After this, you have to account for the Number of nights, in which the swap rates were applied. Don’t forget that on Wednesday night the charges are for 3 days instead of 1 (EightCap’s triple swap is charged on Wednesday, with the exception of Monday for CFDs on stocks and Friday for CFDs on indices). This is required due to weekend holding.

Let’s assume your trade was opened on Monday and closed on Thursday. This makes 5 nights, not just 3. Note that the swap rates may change from day to day and this should be accounted for. If the swap rate is different every day, calculate each day separately and then add them up.

Following the formula above we have:

The long swap of – 4.38 is multiplied by the 2 lots:

4.38 x 2 = -8.76 AUD

If you held the position open for more than 1 day, multiply with the number of nights. In our case the position was open for 5 nights:

-8.76 x 5 = -43.8 AUD

This is the monetary value of the swap rate on your trade for those 5 nights. The number is positive and works in your favor.

The AUD/USD pair is charged in AUD. The amount would be then converted into the currency of your account.

Exchange rate

If your account is in another currency, for example, USD, you have to multiply or divide by the USD exchange rate:

We are using the AUD/USD currency pair to find the exchange rate.

Please note AUD/USD rate is; 1 USD = 1.42 AUD, therefore as we are converting to USD, we divide:

43.8 / 1.42 = 30.85 USD

How to Calculate Swap Rates for Commodities

All commodities are currently charged in USD and then converted to the account currency.

For example, XAU/USD has a Long swap of – 11.27.

If you bought 2 lots, the swap charged would be 2 x – 11.27 equaling -22.54 USD, this total will be converted to your accounts base currency from USD.

All times are AEST.