Overnight swap and swap-free accounts
What you learn in 3 minutesA swap is a small daily charge for holding a leveraged position overnight. On one standard lot of EUR/USD, the charge can be a few hundred naira per night, and it adds up over weeks. A swap-free account removes that charge, but it usually replaces it with a different fee, such as a wider spread or a fixed daily charge.
One lot held for five nights: swap versus swap-free
| Step | Amount | Note |
|---|---|---|
| Position size | 1 standard lot EUR/USD | 100,000 units of the base currency |
| Swap rate per night (example) | ₦350 | This rate varies between brokers and can change daily; it is not fixed. |
| Swap cost for five nights | ₦1,750 | ₦350 x 5 nights |
| Swap-free account: extra spread cost | ₦1,500 | If the spread is 1.5 pips wider on 1 lot, and 1 pip is ₦1,000 at the current rate, the extra cost is 1.5 x ₦1,000 = ₦1,500. This figure depends on the broker and the pip value. |
| Swap-free account: fixed daily charge (alternative) | ₦400 per night | Some brokers charge a fixed fee instead of swap; ₦400 x 5 = ₦2,000. This varies. |
The broker may round the swap, apply a triple charge on one day of the week, or quote a different spread on swap-free accounts. Always check the contract specifications.
The mistake people make here
Many people open a swap-free account thinking it is free, then trade a strategy that relies on tight spreads. The wider spread on every trade can cost more than the swap they avoided. Before choosing, compare the total cost: add up the swap you would pay over your usual holding period and compare it with the extra spread or fixed fee. Do this for your own trade size and holding time, because the numbers change with the market and the broker.Check yourself
If the swap is ₦200 per night and you hold one lot for three nights, what is the total swap?
₦200 x 3 = ₦600.
On a swap-free account, the spread is 2 pips wider than a standard account. If one pip on one standard lot is ₦1,000, what is the extra cost on one trade?
2 x ₦1,000 = ₦2,000.
In Nigeria
- Regulator
- The Securities and Exchange Commission (SEC Nigeria) regulates investment services. Check that any broker you consider is registered with SEC Nigeria.
- Payment methods
- You can usually fund an account by bank transfer, USSD or card. Each method may have its own charges and processing time.
- Currency
- Your account may be in naira (₦) or in another currency. If it is in another currency, the exchange rate affects your deposit and withdrawal amounts.
- Swap-free availability
- Not all brokers offer swap-free accounts, and the terms vary. Some may require proof of faith or charge an administration fee.
- Tax
- Tax rules for trading profits can change. Speak to a qualified tax professional about your own situation.