Here, we’ll cover what swaps are, how they’re calculated, and how they work on your MT4 account.
What is a swap?
A swap, also known as overnight funding, is a fee or credit applied for holding a position overnight. It represents the cost of rolling over a position beyond the trading day and varies depending on the instrument and market conditions.
Depending on market factors, swaps can either be a cost (negative swap), where you’ll pay a fee, or a credit (positive swap), where you’ll receive an amount. Unlike your Capital.com account, which applies swaps directly to your account balance, MetaTrader 4 (MT4) applies the swap to your account P&L, which is realised once a position is closed. Swaps are applied at 9:00pm UTC.
Why are swaps applied?
Swaps are applied due to the interest-rate differential between the two currencies in a forex pair, or the cost of financing leveraged positions in other asset classes. Depending on these factors, you may receive or pay a swap when holding a position overnight.
How are swaps calculated on MT4?
As with other platforms, the method used to calculate the swap on MT4 depends on the asset class. We’ll walk through a calculation for forex and another representing other asset classes. Details on lot size, the long/short swap rate, quote currency and point size for a given instrument are all available in MT4’s Marketwatch window under Symbol > Specifications.
1. Forex swaps (calculated with points)
Formula: [Lot x long/short swap x point size]
- Lot: represents the contract size of the traded instrument
- Long/short swap: the swap rate applied to long or short positions
- Point size (digit): the smallest price movement of the instrument
Example calculation
Here’s an example for a short EUR/USD forex trade with a unit size of 25,000, bearing in mind a standard lot is 100,000 units of base currency.
- Lot size: 0.25 × 100,000 = 25,000
- Long/short swap: 0.448235
- Point size: 0.00001
Swap = (25,000 × 0.448235 × 0.00001) = $0.11 per day, or equivalent in your account currency. This will be credited to your MT4 P&L.
2. Swaps for other asset classes (calculated with interest rates)
Formula: [Lot x long/short swap / 100 / 360]
- Lot: represents the contract size and current price
- Long/short swap: the applicable interest-rate swap
- 100/360: standardised calculation factor for annualised interest
Example calculation
You open a position with a lot size of 0.1. The long/short swap rate for this instrument is 4.931496 and the market is priced at 2,709.75. Using these values, we calculate the swap as follows:
Formula: swap = lot × long/short swap ÷ 100 ÷ 360
- Lot size: 0.1 × 2709.75 (lot size appears in the specification of the symbol as contract size & current price)
- Long/short swap: 4.931496
Swap = (0.1 × 2709.75 × 4.931496) ÷ 100 ÷ 360 = $0.04 per day (again, credited to your P&L).
Where to find swap information on MT4
MT4 users can view swap details by:
- Right-clicking on the instrument in the Market Watch window.
- Selecting ‘Specifications’ to access:
- Swap method (points-based or interest-based calculation).
- Long and short swap rates.
- Point size (digit) for forex instruments.
- Triple swap days (see below).
Managing swaps in trading strategy
- Holding positions overnight: you should be aware of potential costs when carrying positions over multiple days.
- Triple swaps: on MT4, swaps are typically charged three times on selected days to account for weekend rollover costs. Check Symbol > Specifications to learn more about triple swap timings.
- Trading in the direction of positive swaps: some traders factor swaps into their strategy by taking positions where they earn rather than pay overnight fees.
Understanding these calculations can help you anticipate the impact of overnight funding on their positions and manage costs effectively.
More on charges and fees
For more information on the charges and fees we apply across spreads, guaranteed stop-losses and more on the Capital.com platform, visit our charges and fees page.