How do swaps work in trading?

Swaps in trading refer to the interest rate differentials between two currencies in a currency pair, applied during a rollover period when a position is held overnight. When a trader decides to hold a position past the daily close, they may incur a swap or roll-over fee. This fee is derived from the difference in interest rates between the two currencies being traded. Typically, if the currency you are buying has a higher interest rate than the one you are selling, you may receive a credit; conversely, you might incur a charge if the opposite is true. Swaps can vary by broker and are determined based on various factors, including market conditions and central bank rates.