Swap and rollover in gold trading

Swap is the interest adjustment applied to a leveraged position held past the platform’s daily rollover time, usually 5 p.m. New York time. It reflects the cost of financing the position: because a spot trade is never settled, the platform rolls it to the next day and charges or pays the interest-rate difference, plus its own markup. On gold, both long and short swaps are often negative, though the short side is sometimes positive when dollar rates are high.

How it applies to gold trading

Swap is quoted per lot per night, either in dollars or in points. As a hypothetical, a long swap of −$25 per standard lot means a 0.10-lot position costs $2.50 a night, or about $75 a month. Over a six-month hold that is $450 on a position whose margin might be only $400. For day traders who close before rollover, swap is irrelevant; for swing and position traders it is a real cost to put against the expected move.

Swap rates change with interest rates and the platform’s funding costs, so a position opened when swaps were small can become expensive later.

The swap calculator on this site turns a platform’s quoted swap rate, lot size and intended holding period into a dollar figure, which is the number to compare with the expected move before holding overnight.

A common mistake

Ignoring swap when holding gold for weeks. A trade can be right on direction and still lose money if the move is smaller than the accumulated financing.

See also: Triple swap, Swap-free account, Contango, Daily break.

Frequently asked questions