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Monday, December 29, 2008

Tomorrow Next Procedure in Forex Trading

Tomorrow Next or Tom Next or T/N is a common trading procedure in forex market; practiced solely for the purpose of avoiding taking delivery of currencies. Tom Next is a simple procedure which includes closing of open position on market daily close rate and opening a new position on the new market opening rate on next trading day.

In forex trading,
  • Delivery of currencies occurs two days after the transaction date.
  • Most forex traders are speculators who want to avoid taking of delivery.
  • If you buy and sell same lots of a currency pair in same day (or you open and close a position in one day), there is no need of taking delivery. Then it is only about taking profit or paying loss.
Tomorrow Next procedure comes in to play for traders who want to keep their open positions to next trading day and not want to take delivery. All open positions are closed at market closing and (almost simultaneously) are re-opened at opening of next trading day. Now by law you are opened and closed a position in same trading day and there is no issue of taking delivery.

Forex roll over fees is also associated with Tom Next practice. The trader will receive rollover payments if he is buying a high-interest rate currency and or have to pay rollover payments if he is buying a low-interest rate currency.

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posted by NobleTrading at 8:23 AM

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