Just realized what swap fees are and that they are eating into my profits, so I want to share this understanding with everyone.

Most of us think that trading costs are just the spread and commission, but in reality, there’s another silent factor that causes us to lose money every night—that is, the swap fee.

What exactly is a swap fee? It is a fee for holding a position overnight. Imagine that when you trade EUR/USD, you are borrowing one currency to buy another. Each currency has its own interest rate policy. The difference between the interest rates of the two currencies is the origin of the swap.

For example, EUR has an interest rate of 4% per year, but USD has 5% per year. If you buy EUR/USD, you will earn interest on EUR but pay interest on USD. The difference is -1%, which means you have to pay a negative swap. But if you sell EUR/USD, the situation reverses—you will receive a positive swap.

However, the problem is that brokers need to earn revenue too. They add a management fee into the actual swap rate. As a result, even though theoretically you should receive a positive swap, in reality, it might turn out to be negative on both sides.

Another thing to watch out for is the 3-day swap on Wednesdays (or some brokers use Fridays). You will be charged three times the swap because the Forex market is closed on Saturday and Sunday, but financial interest continues every day. Brokers include the interest for those three days into the trading day.

Calculating swap fees isn’t too difficult. If the broker shows it as a percentage per night, just multiply the total value of your position by the swap rate. For example, if you buy 1 lot of EUR/USD at 1.0900 (worth $109,000) and the long swap is -0.008% per night, you will lose $8.72 per night. It doesn’t seem like much, but with 1:100 leverage, that’s 0.8% of your margin per night. That’s the risk to be aware of.

Swap fees are not only about risk. Some traders use it as a carry trade strategy, intentionally trading currency pairs with positive swaps and holding them to earn interest daily. For example, buying AUD/JPY—buying the high-interest Australian dollar and borrowing the low-interest Japanese yen—results in a positive swap in the portfolio. But the risk is that if the AUD/JPY exchange rate drops sharply, the loss from the price movement could outweigh the accumulated swap profit over the years.

Another option is to use a Swap-Free or Islamic account, which doesn’t charge swap fees at all. This is ideal for swing traders or those holding positions for weeks or months. However, brokers make money through other means, such as wider spreads or management fees.

The most important thing is to check the swap rate before opening any position. On MT4 or MT5 platforms, go to Market Watch, right-click on the asset, and look at the Specification. Find the lines for Swap Long and Swap Short. Other platforms usually display this information clearly on the trading page.

Once you understand what swap fees are, you can plan your trading more carefully, avoiding hidden costs that eat into your profits. Every baht lost to swap fees is a baht you could have kept if you plan well.