Spread and swap costs

Forex Foundations

The built-in cost of every trade

The spread, the gap between bid and ask, is the built-in transaction cost on every forex trade. Major pairs like EUR/USD often have spreads under 1 pip, while exotic pairs can run 10 pips or more.

Overnight interest on open positions

A swap, or rollover, is an overnight interest charge or credit applied when a position stays open past the daily rollover time, based on the interest rate difference between the two currencies in the pair.

Day traders can avoid it entirely

A day trader who closes every position before the rollover cutoff never pays or earns swap at all. Swap only matters once a position is held open across that daily cutoff.