What is Rollover?

When you have a position standing open for the duration of more than one day, you’ll either receive interest or you’ll have to pay interest. This is also occasionally being called rollover. In this article I’ll explain to you what rollover actually means en how rollovers are functioning.

In case of a forex transaction it’s always a matter of a currency being sold and a currency being bought. For that reason interest has to step in. When a position is still open at the closing of the currency market, you’ll have to pay interest on the currencies which you have sold and you’ll receive interest on the currencies which you have bought.

A forex broker usually mentions the rollovers on its website, but it’s rather important for you to have at least a broad understanding whether you’ll have to pay rollover or on the contrary you’re going to receive this kind of interest.

Explanation concerning Rollover

To be sure to know whether you’re going to receive interest or you should pay interest instead, you’ll always have to consult the interest rates of the central banks concerning the currency pairs.

Long Positions:

  • A trader will receive interest if he/she has bought the currency carrying the highest interest.
  • A trader will have to pay interest if he/she has bought the currency carrying the lowest interest.

Short Positions:

  • A trader will have to pay interest if he/she has sold the currency carrying the highest interest.
  • A trader will receive interest if he/she has sold the currency carrying the lowest interest.

The currency market handles a different currency date

The currency market closes each day at 17:00 EST (Eastern Standard Time), which is equal to 5 pm in New York and to 23.00 hours local time. However there’s a snake in the grass! The currency market handles a currency date which actually counts not until two days later. That means that when a position is opened on Monday, the currency date will be settled on Wednesday!

However there is one exception to this rule. When you open a position on a Wednesday, the currency date will be on a Saturday, but since the market is closed on Saturday, this currency date is going to be moved to Monday. The consequence of this will be hat you either receive or have to pay interest over a period of three days!

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