Rollover Cost Definition: Rollover cost is the interest charge or credit applied to a leveraged position that is kept open past the daily close, which in forex is 17:00 New York time. It equals the position’s notional value multiplied by the interest rate gap between the two currencies, minus the broker’s markup, for the number of days rolled. When the currency you hold pays a lower rate than the one you borrowed, the result is a charge, and when it pays a higher rate, it can be a credit.
What Is Rollover Cost?
Holding a currency trade for a night is really a small loan. When you buy EUR/USD, you hold euros and owe dollars, and both currencies earn or cost interest set by their central banks. Brokers settle that interest once a day, at the forex close, and the amount they book is the rollover cost.
A trader who opens and closes a position within the same day never sees it. It only appears on an overnight position, one still open when the clock passes 17:00 in New York. At that moment, the broker rolls the position to the next settlement date and posts a debit or credit to the account.
The name hides a simple idea: time costs money when you trade with borrowed capital. The same logic applies to stock and index CFDs, where the broker charges a financing rate on the full position value, and to futures, where the carry cost is built into the price rather than charged separately.
How to Calculate Rollover Cost
For a reader comfortable with the idea, the formula is short:
Rollover = Notional value × (Base currency rate − Quote currency rate ± Broker markup) × Days ÷ 365
The notional value is the full size of the position, not the margin. The rate gap is the interest rate differential between the two currencies, and the sign flips for short positions. Brokers derive these rates from tom-next swap points in the interbank market, where banks roll positions from tomorrow to the next day, then add their own markup.
Take a hypothetical case: US dollar rates at 5%, Japanese yen rates at 0%, and a broker markup of 1%. A trader buys one standard lot of USD/JPY, which is $100,000. The long side earns 5% − 0% − 1% = 4% a year, so each night the account receives $100,000 × 4% ÷ 365, or about $10.96.
Reverse the trade and the numbers turn against you. A short position pays 5% − 0% + 1% = 6% a year, or about $16.44 per night. Over a 30-day hold that is roughly $493, the equivalent of about 74 pips on a lot where each pip is worth $6.70 at a price of 150.00. The markup explains why the credit to the long is always smaller than the charge to the short.
Rollover Cost vs. Swap Rate
| Rollover Cost | Swap Rate | |
|---|---|---|
| What it is | The amount actually charged or credited | The rate or points the broker quotes |
| Unit | Account currency, e.g. $16.44 | Points, pips or % per year per lot |
| Depends on position size | Yes, scales with notional value | No, quoted per standard unit |
| When it appears | At each 17:00 New York rollover | Published in advance for each pair |
| Wednesday effect | Booked three times over | Same rate, applied for three days |
In short, the swap rate is the price tag and rollover cost is the bill.
Why Is Rollover Cost Important for Traders?
Rollover decides whether time works for you or against you. In a carry trade, the credit is the whole point: you hold the high-yielding currency and collect the rate gap every night. When the Federal Reserve lifted its target range to 5.25–5.50% in July 2023 while the Bank of Japan kept its short-term rate at −0.1%, long USD/JPY positions earned more than 5% a year before markups, and short positions paid the same.
That asymmetry changes the maths of a trade idea. A short USD/JPY position in that period had to gain several hundred pips over a year just to cover financing. Traders who looked only at entry, stop and target, and ignored rollover, often found their winning trades barely broke even.
Rollover also carries two risks of its own. Central banks can change rates at any meeting, and a credit that justified a long-term hold can shrink or turn into a charge within a day. Leverage adds the second risk: financing is paid on the full notional value, so a position using 50 times leverage pays interest on 50 times the trader’s margin, which can drain a small account even when price goes nowhere.
Key Takeaways
- Rollover cost is the daily interest charge or credit on a leveraged position held past the 17:00 New York close.
- It is calculated on the full notional value from the rate gap between the two currencies, adjusted by the broker’s markup and the number of days rolled.
- The markup makes rollover asymmetric: the side that earns always receives less than the opposite side pays.
- For long holding periods, rollover can matter as much as the spread or commission, and it can turn a profitable price move into a loss.
- Rollover changes when central banks change rates, so a credit that supports a trade today is not guaranteed tomorrow.
Is rollover cost the same as swap?
The terms overlap. The swap rate is the price quoted per lot or in points, while rollover cost is the actual amount debited or credited to your account when the position rolls at the daily close.
How can I avoid rollover costs?
Close the position before 17:00 New York time, trade on a timeframe short enough that you never hold past the close, or choose the direction that earns the higher rate when your analysis allows it. Some brokers also offer swap-free accounts, which usually replace the swap with a fixed fee.
Why is my rollover negative on both long and short positions?
The broker adds a markup to each side. If the interest rate gap between the two currencies is smaller than that markup, both the long and the short side pay, which is common when two central banks set similar rates.
Does rollover cost change every day?
It can. Brokers update swap rates as interbank funding rates move, and a central bank decision can flip a pair's rollover from a credit to a charge overnight.
