Forex Rollover – What Traders Need to Know

Forex Rollover What Traders Need to Know

Forex Rollover: What Traders Need to Know

Forex Rollover: What Traders Need to Know lso known as swap, is an important concept in forex trading that all traders need to understand. In fact, it is an essential aspect of navigating the ever-changing market landscape.

When a trade is rolled over overnight, it closes out the existing position and opens a new one with a different value date. In this case, the interest rate differential between the two currencies in the pair will determine whether a trader will earn or pay interest. The estimate for this difference is calculated by subtracting the long currency’s interest rate from the short currency’s and dividing that by 365 times the base currency interest rate.

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In addition to interest rate differentials, a number of other factors can influence rollover rates. These can include economic data releases, geopolitical events and investor sentiment. These can all lead to changes in the interbank lending rates, which in turn can affect the interest rates that are passed on to traders in the form of rollover costs.

Generally, rollover is applied at 5 pm Eastern Standard Time every weekday. However, if a position is held open after the close of the US session on a holiday, such as Independence Day (July 4), the rollover will be delayed until the next Wednesday. In addition, the calculation for determining whether a position will be credited or debited will be multiplied by three to account for the weekend.