Swap rollover is the process of adjusting the interest rate differential that occurs when carrying a currency pair to the next day. Typically, in the FX market, positions dated two business days ahead are automatically rolled over to the next trading day.

Here’s a specific example:

Suppose a trader holds a long position in the EUR/USD currency pair (buying euros and selling US dollars). In this case, the trader receives interest on euros while paying interest on US dollars. When a rollover occurs, the trader will carry the position to the next day, reaffirming the right to receive euro interest and the obligation to pay US dollar interest.

The specific calculation method depends on the interest rate differential between the currencies and the trading volume of the currency pair. Generally, holding a position with a higher interest rate currency results in a profit, while holding a position with a lower interest rate currency incurs a cost.

For example, consider a trader holding a long position in the AUD/JPY currency pair. If Australia’s policy interest rate is higher than Japan’s, the trader will receive swap points. Thus, carrying the long position to the next day allows the trader to receive interest on Australian dollars.

Rollovers typically occur based on 21:00 GMT (or 22:00 GMT). If you hold a position beyond this point, swap points will be added or subtracted until the next trading day. It is common for three days’ worth of swap points to be calculated over the weekend.

The receipt or payment of swap points due to rollovers varies depending on the interest rate differential of the currency pair held by the trader. Additionally, the swap rates and fees provided by the broker may also affect this. Traders need to consider rollover information when developing strategies or managing risks involving swap points.