Holding Trades Overnight? Here’s Why Your Account Might Be Bleeding Cash

You placed a trade. You nailed the direction. The market is moving in your favor, so you decide to hold the position for a few days to squeeze out every last pip of profit.

But when you wake up the next morning, the math doesn't add up. Your profit is there, but your actual account equity is lower than expected.

What happened? You just met the silent killer of swing trading: Overnight Interest, also known as the Swap.

Novice traders often obsess over spreads and commissions, ignoring the swap. That is a rookie mistake. Depending on what you are trading, holding a position while you sleep will either put extra cash in your pocket or slowly drain your account.

Lets cut through the noise and look at how this actually works.

The Simple Math Behind the Swap

Forget the complex banking jargon. Here is the reality: Forex trading is always done in pairs. You are buying one currency and selling another simultaneously.

Every currency has an interest rate set by its Central Bank.

• When you buy a currency, you earn interest on it.
• When you sell a currency, you pay interest on it.

The “Swap” is simply the difference between these two interest rates.

Scenario A: The Good News (Positive Swap)

Let's say you buy USD/JPY.

• The US Dollar currently has a higher interest rate (you are buying this, so you earn interest).
• The Japanese Yen has a very low interest rate (you are borrowing/selling this, so you pay small interest).

Since what you earn is greater than what you pay, the broker pays you. You wake up, and theres a little bonus credit in your account just for holding the trade. This is called a “Positive Carry.”

Scenario B: The Bad News (Negative Swap)

Now, flip it. You decide to Short (Sell) USD/JPY.

• You are selling the high-interest USD (you pay interest).
• You are buying the low-interest JPY (you earn peanuts).

Now you owe money. The broker will deduct this difference from your account balance every single night you keep that trade open. If you hold this for weeks, that cost stacks up and eats into your profits.

Can you actually make money just from Swaps?

Yes, but its risky. This strategy is called the “Carry Trade.” Big institutional players do this all the time—buying high-interest currencies against low-interest ones just to harvest the daily interest payments.

However, retail brokers usually add a “markup” to the swap rates. This is their fee for providing the service. Because of this markup, you might find that on some pairs, both the Long and Short positions have negative swaps.

This brings me to a critical safety warning.

Don't Get Burned by “Mystery Fees”

Not all brokers play fair. Some shady platforms will drastically inflate the negative swap rates to bleed out profitable traders who hold positions long-term. They make the “rent” for holding a trade so expensive that you are forced to close it.

Before you deposit your hard-earned savings, you need to know who you are dealing with. Check the broker's regulatory status and trading environment on WikiFX.

I always tell my students: WikiFX is your shield. If a broker has a history of manipulating fees or hiding swap conditions, youll likely see the warnings there first. Don't let a scam broker steal your swap profits.

The “Wednesday Trap” You Need to Know

If you are new to this, here is a specific rule that catches almost everyone off guard: Triple Swap Wednesday.

Foreign exchange markets settle trades in two days (T+2). If you hold a position open past 5:00 PM (New York time) on Wednesday, the trade settles on the weekend. Since banks are closed on weekends, they charge you swap for Saturday and Sunday essentially all at once.

This means on Wednesday night, the swap fee (or earnings) is multiplied by three.

If you are holding a “negative swap” trade, Wednesday night is expensive. If you are scalping or day trading, you might want to close your position before the daily rollover to avoid that hit.

Coach Ks Final Play

Stop ignoring the swap column in your trading terminal.

1. Check the Rates: Before you take a swing trade (holding for days/weeks), look at the swap specifications for that pair.
2. Trend Alignment: Try to trade in the direction of “Positive Carry” when possible. Being paid to hold a trade makes it much easier to be patient during choppy markets.
3. The Wednesday Check: If you are short-term trading, get out before the Wednesday rollover if the swap is negative.

Trading is hard enough without bleeding cash overnight. Understand the costs, verify your broker, and protect your capital.

Disclaimer: This article is for educational purposes only and does not constitute financial advice. Trading involves risk, including the loss of principal.