What is Rollover in the Forex Market?
July 28th, 2008 Posted in FX Education
In the spot Forex market, traders must be settled in two business days. If a trader sells 100,000 Euros on Tuesday, the trader must deliver 100,000 Euros on Thursday, unless the position is “rolled over.” As a service to our traders, ForexYard automatically rolls over all open positions to the next settlement date at 5:00 pm New York time. Rollover involves exchanging the positions being held for a position expiring the following settlement date. The positions exchanged are usually not valued at the same price. The difference in amount varies greatly based on the currencies pair, the interest rate differential between the two currencies, and fluctuates day-to-day with the movement of prices
For positions open at 5:00 pm EST there is a daily rollover (interest payment) you pay for an open position depending on your established margin level and position in the market. If you do not want to earn or pay interest on your positions, simply make sure they are closed by 5:00 pm EST, the established end of the market day.
Since every currency trade involves borrowing one currency to buy another, interest rollover charges are an inherent part of FX trading. Interest is paid on the currency that is borrowed, and earned on the one that is purchased. If a client is buying a currency with a higher interest rate than the one he/she is borrowing, the net differential will be positive – and the client will earn funds as a result.
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Tags: Currencies, daily rollover, FX trading, interest rates, Rollover
