A swap rate (also called a rollover rate) is the interest you earn or pay for holding a forex position overnight. When you hold a currency pair, you are effectively borrowing one currency to buy another. The swap rate reflects the interest rate differential between the two currencies in the pair. If you are long a currency with a higher interest rate than the one you are short, you receive a credit; otherwise, you pay a charge.

Swap rates are expressed in points (pips) and are applied to your position each day at the broker's rollover time, usually around 5:00 PM EST. On Wednesdays, most brokers charge triple swaps to account for the weekend settlement period. The dollar amount of the swap depends on your position size: Daily Swap = Swap Points x Pip Value x Lots.

Carry trading is a strategy that specifically targets swap income by buying high-interest-rate currencies against low-interest-rate currencies. For example, if AUD has a higher interest rate than JPY, going long AUD/JPY may earn a positive swap each night. However, carry trades are subject to exchange rate risk, and an adverse price movement can quickly offset accumulated swap income.