What is Forex Rollover Interest?
In Forex market, most of the trades are done as spot trading, in which the deals are due to settled after 2 days. For overnight holding of positions, the forex broker automatically close all positions at the end of the trading day (10pm – London time and 5pm EST) and simultaneously open new positions. The forex traders will credited of debited an rollover interest rate in his account according to the difference between the inter-bank interest rate of the currencies he trading.
Forex rollover fee is credited to the traders account if the countries currency he buys has greater interest than that of the pair, and vice versa. If the trader sells the currency, having higher interest rate, then the rollover fee is deducted from his account, and vice versa. The fee is calculated with respect to the trader’s full position, not to his actual traded amount. Thus the effect of rollover fee is magnified with marginal trading. And also remember there will be increased rollover fee for trades in Wednesday as they are settled after 4 days on Monday.
Although the Forex rollover fee is not that much a deciding factor, with long run trades can profit or loss considerably. For example if a trader buys one contract of British Pound (high interest rate) against USD, he may profit around $10 per day and for one year $3560, if the interest rate different stays same.
Forex rollover fee is credited to the traders account if the countries currency he buys has greater interest than that of the pair, and vice versa. If the trader sells the currency, having higher interest rate, then the rollover fee is deducted from his account, and vice versa. The fee is calculated with respect to the trader’s full position, not to his actual traded amount. Thus the effect of rollover fee is magnified with marginal trading. And also remember there will be increased rollover fee for trades in Wednesday as they are settled after 4 days on Monday.
Although the Forex rollover fee is not that much a deciding factor, with long run trades can profit or loss considerably. For example if a trader buys one contract of British Pound (high interest rate) against USD, he may profit around $10 per day and for one year $3560, if the interest rate different stays same.
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posted by NobleTrading at
7:34 AM
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