Overnight swap and swap-free accounts
What you learn in 3 minutesSwap is the word a platform uses for the daily charge, or the daily credit, that comes from holding a leveraged position past the daily cut-off. On a standard lot of AUD/USD at about 0.6640, one pip is worth A$10, so a swap of a few pips a night is a real amount of money in the account. A swap-free account removes that charge and usually replaces it with a different one, which this lesson puts next to it in figures.
One standard lot held overnight: swap against no swap
| Step | Amount | Note |
|---|---|---|
| Position | 1 standard lot of AUD/USD | 100,000 units of the base currency |
| Price used | 0.6640 | the AUD/USD level in this example |
| One pip | A$10 | 100,000 x 0.0001 = 10 units of the quote currency, converted at 0.6640 |
| Swap on a standard account | A$4.00 a night | 0.4 pips x A$10 per pip, a figure that varies between brokers |
| Swap on a swap-free account | A$0.00 a night | the daily swap is not charged |
| Administration charge on the swap-free account | A$9.00 a night | 0.9 pips x A$10 per pip, a flat charge that varies between brokers |
| Difference over one night | A$5.00 more | A$9.00 minus A$4.00 |
The broker may round the swap, quote it as a percentage of the position, apply a wider spread on a swap-free account, or add a separate administration charge. The exact figures vary between brokers and can change with market conditions.
The mistake people make here
The common mistake is to read swap-free as free. The daily swap is removed, but an administration charge, a wider spread or both usually take its place, and on a position held for a single night that replacement can cost more than the swap it replaced. The second mistake is to treat the swap as a fixed number and never check it again, when the rate is set by the broker and can change. Before opening a position meant to be held overnight, compare the swap on the standard account with the total charge on the swap-free account for the same lot size and the same number of nights. If the position is closed before the daily cut-off, neither charge applies.Check yourself
A standard lot of AUD/USD is held for three nights. The swap is 0.4 pips a night and one pip is A$10. What is the total swap?
0.4 pips x A$10 = A$4.00 a night. Three nights: A$4.00 x 3 = A$12.00.
The same lot is moved to a swap-free account with an administration charge of 0.9 pips a night. What is the total over the same three nights, and which account is cheaper?
0.9 pips x A$10 = A$9.00 a night. Three nights: A$9.00 x 3 = A$27.00. The standard account is cheaper by A$27.00 minus A$12.00 = A$15.00 over the three nights.
The position is closed before the daily cut-off. What is the swap for that day?
Nothing. The swap applies to positions held past the cut-off, so a position closed before it carries no swap for that day.
In Australia
- Regulator
- ASIC regulates forex and CFD providers that offer accounts to Australian residents.
- Account currency
- An account can be funded in Australian dollars, so money figures are written in A$.
- Funding methods
- PayID, BPAY and cards are common ways to move money into a trading account.
- Instrument in examples
- AUD/USD, around 0.6640, is used throughout this lesson.
- Swap-free accounts
- The charges on a swap-free account vary between brokers, so the figures in this lesson are examples rather than a standard rate.