Overnight swap and swap-free accounts
Swap is the daily cost, or credit, of holding a leveraged position past the broker's daily cut-off time. It exists because the two currencies in the pair carry different interest rates, and because the broker funds the leverage. On one standard lot of USD/ZAR, a negative swap of a few rand per night can add up over weeks.
How the broker calculates the swap on one lot
The broker looks at the two interest rates behind the pair. USD/ZAR carries a United States rate and a South African rate. The difference between them is the starting point. The broker then adds a mark-up. That mark-up is the broker's charge for funding the leverage. The final swap figure is the difference plus the mark-up.
The swap is quoted per lot per night. One standard lot of USD/ZAR is 100,000 units of the base currency. The broker may quote the swap in rand or in pips. If the quote is in pips, you convert it to rand using the pip value for your lot size. On USD/ZAR at around 18.4100, one pip on a standard lot is about R10.00. A swap of 4.2 pips is about R42.00.
The broker applies the swap at its daily cut-off time. That time varies between brokers. It is often around 22:00 or 23:00 South African time. A position opened before the cut-off and held past it pays one night of swap. A position closed before the cut-off pays none. The broker may also charge triple swap on one day of the week, usually Wednesday, to cover the weekend. Check your broker's schedule for the exact cut-off and triple-swap day.
What changes on a swap-free account
A swap-free account removes the nightly swap. The broker does not charge the interest difference or its mark-up on that position. The account is sometimes called an Islamic account. It is open to any client who chooses it. The broker replaces the swap with a different charge.
The replacement is usually one of two things. It can be a fixed administration fee per lot per night. It can be a wider spread on the pair. Some brokers use both. The fee is often a flat rand amount, such as R60.00 per lot per night. A wider spread means you pay more when you open and when you close the position. That cost is taken at the trade, not overnight.
The swap-free label does not mean the position is free to hold. It means the cost has moved. A fixed nightly fee is easy to compare with a swap. A wider spread is harder, because it depends on how long you hold and how the price moves. Ask the broker for the exact fee and the exact spread on a swap-free account before you open a position.
How to compare the two account types with your own numbers
Write down the swap per lot per night for your pair. Write down the swap-free fee per lot per night. Write down the spread on each account. Use the broker's current figures. Do not use an old screenshot or a figure from another broker. Fees change, and they vary between brokers.
Work out the total cost over the number of nights you plan to hold. For the swap account, multiply the nightly swap by the number of nights. For the swap-free account, multiply the nightly fee by the same number. Then add the spread cost for each account. The spread cost is the spread in pips multiplied by the pip value for your lot size.
Compare the two totals. The swap-free account wins when the holding period is short and the swap is large. The swap account wins when the holding period is long and the swap-free fee is large. There is no single answer that fits every trade. The right choice depends on your lot size, your pair, and how long you hold. Run the numbers for each trade before you decide.
1 lot of USD/ZAR held one night: swap against swap-free
| Step | Amount | Note |
|---|---|---|
| Position size | 1 standard lot | One standard lot of USD/ZAR is 100,000 US dollars of notional value. |
| Reference price | 18.4100 | The USD/ZAR price used for this illustration. |
| Notional value in rand | R1,841,000 | 100,000 multiplied by 18.4100. |
| Swap rate quoted by the broker | -R42.00 per night | A swap rate is set by the broker and varies between brokers, so this figure is an example only. |
| Swap over five nights | -R210.00 | R42.00 multiplied by 5. |
| Swap-free administration charge | R60.00 per night | A swap-free account usually replaces swap with a fixed charge, which also varies between brokers. |
| Swap-free charge over five nights | R300.00 | R60.00 multiplied by 5. |
The broker may round the swap, add a mark-up, apply a wider spread on a swap-free account, or charge triple swap on one day of the week. Check the fee schedule before holding a position overnight.
Doing it once, step by step
These steps show you how to find the swap and swap-free charges for your own account, then compare them for a planned holding period. Do them once, in order, before you hold any position overnight.
- 01
Find the swap rate for your pair
Log in to your broker's platform or client area. Open the contract specifications for USD/ZAR. Look for the swap short and swap long figures. Note the units, whether rand or pips. Write both figures down.
- 02
Find the swap-free fee and spread
Open the fee schedule for a swap-free account. Find the administration fee per lot per night. Find the spread for USD/ZAR on that account type. If the broker does not publish these, ask support in writing. Keep the reply.
- 03
Convert the swap to rand per night
If the swap is in pips, multiply by the pip value for your lot size. On USD/ZAR at around 18.4100, one pip on a standard lot is about R10.00. So 4.2 pips is about R42.00. If the swap is already in rand, use it as it is.
- 04
Choose your holding period in nights
Decide how many nights you plan to hold the position. Count each daily cut-off the position will pass. Add any triple-swap nights. For example, a position held over a Wednesday may pay three nights of swap on that one day.
- 05
Calculate the total cost for each account
For the swap account, multiply the nightly swap by the number of nights. For the swap-free account, multiply the nightly fee by the same number. Then add the spread cost to each total. Spread cost is the spread in pips times the pip value.
- 06
Compare and record the cheaper option
Subtract the smaller total from the larger. The difference is what you save by choosing that account. Write the result next to your trade plan. Repeat this for each trade, because the answer changes with the holding period and the lot size.
The mistake most people make here
The common mistake is to assume that a swap-free account is simply cheaper. It removes the swap but usually adds a fixed administration charge or a wider spread, and on the figures above the swap-free route costs more over five nights. The second mistake is to ignore swap entirely and hold a leveraged position for weeks, letting a small nightly charge grow into a large one. Before opening a position, read the broker's fee schedule and work out the nightly cost on your actual lot size. If you plan to hold for more than a few days, compare both account types using your own numbers.Check yourself
If the swap is -R42.00 per night, what is the swap over ten nights?
R42.00 multiplied by 10 equals R420.00.
If the swap-free charge is R60.00 per night, how many nights pass before it costs more than a swap of R42.00 per night?
From the first night, because R60.00 is greater than R42.00. Over five nights the difference is R300.00 minus R210.00, which is R90.00.
Questions that come up next
If the swap is charged at the broker's cut-off, what happens if I open a position just before it?
The swap is applied at the broker's daily cut-off time. If you open a position before the cut-off and still hold it when the cut-off passes, you pay one night of swap. If you close it before the cut-off, you pay none. The exact cut-off time varies between brokers, so check your broker's schedule.
How is the swap calculated on one lot of USD/ZAR?
The broker takes the difference between the United States interest rate and the South African interest rate. It adds a mark-up for funding the leverage. The result is quoted per lot per night. On a standard lot of USD/ZAR, one pip is about R10.00, so a swap of 4.2 pips is about R42.00.
What is triple swap and when does it apply?
Triple swap is a charge of three times the normal swap on one day of the week. It usually falls on a Wednesday to cover the weekend, when the market is closed. The day varies between brokers. Check your broker's schedule so you know which night carries the triple charge.
Is a swap-free account always cheaper than a standard account?
No. A swap-free account removes the nightly swap but replaces it with another charge. That charge is often a fixed administration fee per lot per night, or a wider spread, or both. On the figures in this lesson, the swap-free route costs more over five nights. You need to compare the total cost over the time you plan to hold.
Can I hold a leveraged position for weeks without worrying about swap?
No. Swap is charged every night the position is held past the cut-off, and it adds up. A small nightly charge can become a large cost over weeks. If you plan to hold for more than a few days, work out the nightly cost on your actual lot size and compare both account types using your own numbers.
Does the swap-free label mean the position is free to hold?
No. The label means the cost has moved, not disappeared. A fixed nightly fee is easy to compare with a swap. A wider spread is harder because it depends on how long you hold and how the price moves. Ask the broker for the exact fee and the exact spread on a swap-free account before you open a position.
In South Africa
- Currency
- The rand, written R (ZAR).
- Instrument in this lesson
- USD/ZAR, around 18.4100.
- Regulator
- The Financial Sector Conduct Authority (FSCA) licenses financial services providers in South Africa.
- Funding methods
- EFT, instant EFT and bank cards are common ways to fund a trading account.
- Swap rates
- Swap rates and swap-free charges are set by each broker and vary between brokers.
The words used on this page
- swap
- The daily cost or credit for holding a leveraged position overnight. It comes from the interest rate difference between the two currencies in the pair, plus the broker's mark-up.
- cut-off time
- The time each day when the broker applies the swap to open positions. It varies between brokers and is often around 22:00 or 23:00 South African time.
- triple swap
- A charge of three times the normal swap on one day of the week, usually Wednesday. It covers the weekend when the market is closed.
- swap-free account
- An account that removes the nightly swap. The broker replaces it with another charge, such as a fixed administration fee or a wider spread. It is sometimes called an Islamic account.
- mark-up
- The broker's charge added to the interest rate difference when calculating the swap. It is the broker's fee for funding the leverage.
- standard lot
- A position size of 100,000 units of the base currency. For USD/ZAR, one standard lot is 100,000 US dollars.
What to take away
- Swap is the daily cost or credit for holding a leveraged position past the broker's cut-off time.
- A swap-free account removes the swap but replaces it with a fixed fee, a wider spread, or both.
- On the figures in this lesson, the swap-free route costs more over five nights.
- Check your broker's fee schedule and work out the nightly cost on your actual lot size before holding overnight.