The Full Cost and Profit of a One-Week Swing Trade

[Fairman]

The Full Cost and Profit of a One-Week Swing Trade

Scenario: you buy 0.20 lots of EUR/USD, the chart shows the bid at 1.1000 at entry, the spread is 1.2 pips, and you close a week later when the bid is 1.1120. The long swap is minus 6.50 dollars per lot per night, with the same 7 rollover units as a week.

Work it out. Chart movement on the bid: 120 pips. You bought at the ask, 1.2 pips above the bid, so the real gain is 118.8 pips. At 0.20 lots, one pip is 2 dollars, so the gross is 237.60 dollars.

Swap: 7 units times 6.50 times 0.20 is 9.10 dollars.

Net profit: 237.60 minus 9.10, which is 228.50 dollars.

Compare with the headline. A naive reading of 120 pips at 2 dollars is 240 dollars. The true number is 228.50, which is about 5 percent lower. The spread and swap together took 11.50 dollars.

Now stress it. If the trade had gone nowhere, closing at the same bid, you would have lost the spread of 2.40 dollars plus 9.10 in swap, 11.50 dollars. That is the cost of holding a flat trade for a week.

For a trader risking 40 dollars per trade, that cost is nearly 30 percent of the risk, which would matter if repeated across many flat trades.

Takeaway: costs affect even the swing trade, and a trade that goes sideways is not free.

Practical step: recompute your last swing trade including spread and swap, and compare with the headline pips.

[FXS HongKong Scalper]

The calculation looks right. One thing many people forget is that the spread on exit also matters if you close a long at the bid. Here the bid at exit is used, so it is already included.

Also, the swap rate can change during the week if a central bank moves rates, and some brokers change their swap tables on Mondays. For a one week hold the effect is small, but worth knowing.

[Fairman]

The arithmetic checks out, and the split between the two costs is worth noting. The spread cost 2.40 dollars once, at entry, while the swap cost 9.10 dollars spread across the week. For a swing trader, swap is often the bigger of the two, which is the reverse of what scalpers experience. Holding for two weeks instead of one would double the swap to 18.20 dollars while the spread stays at 2.40. So for longer holds, the swap rate on the chosen direction becomes the main cost to compare between brokers, and between pairs that express a similar view.

[Fairman]

The flat trade scenario is a useful mental anchor. A week of holding a position that goes nowhere costs 11.50 dollars, which is almost 30 percent of a 40 dollar risk. If a swing strategy has several flat or near flat trades a month, those costs add up to a real drag. One response is a time stop, as discussed in the time stop thread: if a swing trade hasn't moved meaningfully after a set number of days, closing it limits the swap paid on trades that aren't working. Another is choosing the direction with positive swap when two setups are otherwise equal.

[Fairman]

It's worth remembering that the chart shows the bid, so a long position's entry at the ask is invisible on the chart. The 1.2 pip spread here means the trade started 1.2 pips in the red. On exit, a long closes at the bid, which is what the chart shows, so there's no extra cost at the close. For a short, the reverse applies: entry at the bid, exit at the ask, so the spread hits at the close instead. Either way, a round trip costs one spread. Spread widening at the moment of exit can make the short's closing cost larger than expected.

[Amanhasnoname]

I ran this exact check on my own swing trades after a month where the statement looked worse than my chart notes. I pulled five EURUSD and GBPUSD holds of about a week each and recomputed them with the ask at entry and the actual swap line from the platform. The headline pips said I was up 310, but after spread and swap the figure was 281, so roughly nine percent of the gain was gone before I even looked at it.

The swap is what surprised me. On GBPUSD my long side paid noticeably more per night than the short side would have received, and the Wednesday rollover charged triple, which a quick one week count tends to miss. I now count the Wednesday night as three units whenever a trade crosses it.

My habit since then is to write a cost estimate next to every swing idea before entering. If the expected flat cost is more than about a quarter of my planned risk, I either shorten the hold or pick the pair with the friendlier carry direction.

[Fairman]

Recomputing the last swing trade, as the practical step suggests, is quick and often eye opening. Most platforms show the swap charged on each position in the trade history, so the figure is easy to find. Comparing the net profit with the headline pips times pip value shows how much costs took. Has anyone here done this for a few months of swing trades? I'd be interested in what share of gross profit went to swap, and whether it changed how long you were willing to hold positions in pairs with negative carry in your direction.