What is a swap in forex?

This lesson explains the meaning of Swaps in forex trading and how it is calculated in currency trading. 

In Forex trading, a swap refers to the interest differential between the two currencies in a currency pair. It is the interest earned or paid for holding a position overnight. Each currency in the pair has an associated interest rate, and the swap is calculated based on the difference between these rates. When you hold a position overnight, your broker applies this swap to your account. Depending on the rates and the direction of your trade, you could either earn or pay interest. Swaps can impact the overall profitability of your trades, so it’s important to understand how they work when planning your Forex strategy.

Enjoy.