When you keep a position overnight, your broker charges a swap rate. Swap rate, also known as rollover rate, is the fixed element of a type of currency transaction. In this transaction, your broker exchanges the interest payments in one currency for those in another.
You can easily calculate the swap rate using the swap calculator, also known as the FX swap calculator.
Whether your position is long or short is an essential consideration to make for calculating the swap rate.
So, why is swap rate important? It is because it can reduce your gains on your overnight positions. Hence, you should know how to calculate it.
The swap calculator does this for you. You just have to select your financial instrument, the currency pair you are trading, and your position size. The swap calculator, also known as the interest rate swap calculator, does the rest for you.
For forex, the Swap Calculator works as follows:
Swap = (Pip Value * Swap Rate * Number of Nights) / 10