Why holding overnight costs money
When you trade forex with leverage, you are effectively borrowing to control a position larger than your deposit. Each currency in a pair has its own interest rate, and holding the position overnight means paying or receiving the difference between those rates. This adjustment is called swap, or rollover.
Depending on the direction of your trade and the rate difference, swap can be a charge or, less commonly, a small credit. For most retail positions on most pairs, it tends to be a cost, and it is applied each night the position stays open.
A worked example
Suppose you hold a position and the daily swap is a charge of a few units of currency per night. On a single overnight hold that is trivial. But hold it for three weeks and those small nightly charges add up, silently working against your profit target before the price has done anything.
Many brokers also apply a triple swap on one day of the week to account for the weekend, so a Wednesday-to-Thursday hold might cost three times the usual. Check your broker's swap schedule so these charges never surprise you.
Why it matters for your strategy
Swap is largely irrelevant to a day trader who closes everything before the cut-off, but it is central to anyone holding positions for days or weeks. A swing or position trader must factor swap into whether a trade is worth keeping open at all.
People are often baffled when "profits disappear overnight" — swap is a frequent culprit. Knowing it exists, and checking its size before holding, turns a mysterious erosion into a predictable, planned-for cost.