In the foreign exchange market, swap points are typically calculated for each trading day. However, because the forex market operates 24 hours a day during the business week, there is no rollover or swap points applied on Saturdays and Sundays.
The reason for this is that most central banks do not pay or charge interest on the weekends since they are not operational during that time. As a result, positions held over the weekend may not accrue or incur swap points for those two days.
It's important to note that the forex market does not close over the weekend; it simply experiences lower trading activity. The lack of rollover interest on Saturdays and Sundays is a standard practice in the forex market. Swap points are typically applied or deducted during the rollover period, which occurs at the end of each trading day, except for Fridays when it accounts for the weekend as well.
Let's consider a hypothetical example:
Assume today is Thursday, November 16, 2023. If you have a currency position open on this day and plan to hold it through the weekend, the swap points for the rollover on Thursday night would typically account for the interest for Thursday, Friday, Saturday, and Sunday.
For simplicity, let's say the current interest rate for the currency you're long is higher than the one you're short. You would earn swap points for holding the position. However, since there is no trading activity on Saturday and Sunday, the swap points for these days would not be applied. The next rollover, accounting for Monday's interest, would occur on Monday night.
So, in this example, the swap points for the weekend would be calculated for Thursday and Friday nights, but not for Saturday and Sunday nights. This is a simplified explanation, and actual swap point calculations can depend on various factors including the specific currency pair, interest rate differentials, and the policies of the broker you're using. Always check with your broker for their specific rules and calculation methods.
