Swap Rate

Swap rates matter for EA selection in two ways: as a direct cost or revenue for strategies holding overnight positions, and as a constraint that filters which strategy classes can operate profitably on which broker structures.

Swap rate mechanics:

• **Computation**: the rate is roughly (long-currency interest rate − short-currency interest rate) × notional position size, scaled to daily and adjusted for broker mark-up • **Long high-yielder pays positive carry**: in 2026, long USDJPY at 4% USD rate vs 0.5% JPY rate receives roughly +3.5%/year on the position annualised, paid daily as a small credit • **Short high-yielder pays negative carry**: short USDJPY at the same rate differential pays -3.5%/year, accrued daily as a small charge • **Wednesday triple swap**: positions held through Wednesday 17:00 NY accrue 3× the daily swap to cover Saturday and Sunday when the inter-bank market is closed • **Broker mark-up varies materially**: the swap rate the trader sees is rarely exactly the inter-bank rate differential; brokers add mark-up that effectively widens negative-carry pays and narrows positive-carry credits

Impact on EA strategy classes:

• **Scalping (M1-M5)**: positions held minutes to hours; swap cost is negligible. Strategy class is swap-insensitive. • **Day-trading (M15-H4)**: positions closed before daily rollover; swap cost is minimal if execution discipline holds. Occasional overnight holds during news events accumulate swap. • **Swing-trading (H1-D1)**: positions held days to weeks; swap is a material recurring cost or revenue. For high negative-carry pairs, can erode 1-3% per month of position size • **Trend-following (H4-D1+)**: positions held weeks; swap matters significantly. For long-USDJPY trend strategies in 2026, the swap credit can add 1-2% per month to the return; for short-USDJPY trends, it subtracts a similar amount • **Carry trade strategies**: position-holding for the explicit purpose of collecting carry; swap is the entire return source

Broker variability:

• Tier-1 ECN brokers (IC Markets Raw, Pepperstone Razor, Tickmill Pro) publish their swap rates daily and tend to mark up less than Standard-account brokers • Standard-account brokers often have wider negative-swap mark-ups that compound the cost of holding overnight positions • Some brokers offer swap-free (Islamic) accounts that eliminate the carry charge but typically come with administration fees or wider spreads

For EA evaluation, vendors deploying swing or trend strategies should disclose typical swap impact on their published track records. Vendors who don't disclose this are either (a) hand-waving on a material cost component or (b) hiding swap costs that materially reduced realised returns vs the strategy's signal-level edge.