How do swaps work in trading?

Swaps, also known as rollover rates, are the interest rates applied to positions held overnight in Forex trading. They represent the difference in interest rates between the two currencies involved in a currency pair. When a trader holds a position beyond a trading day, they are either paid or charged the swap rate, depending on the interest differential and the direction of their trade. Generally, if a trader is long on a currency with a higher interest rate compared to the sold currency, they may receive a swap. Conversely, if the interest rate is lower, the trader may incur a cost. Swaps are typically expressed in pips and can vary based on market conditions and the broker's policies.