Forex rollover interest is one of the fundamentals of forex trading which every forex trader should be aware of. Rollover interest is applicable to overnight open forex positions; to be exact, positions open before 5 pm EST and remain opened after 5 pm EST. The retail forex broker calculated the interest and is credited to or debited from traders' account.
The roll over interest is calculated based on the difference of interest rates of the nations of the currency pairs trader is holding. The interest is applicable to the total position size or the total value of trade, not just the margin/leveraged portion. The interest is credited to the trading account when the country of currency the trader purchased has higher interest rate than the country of currency the trader sold. The interest is debited when the reverse happens; when the currency trader bought has lower interest rate than currency sold. Roll over occurs when the broker automatically closes and re-open all open positions to avoid real cash/currency settlement.
Roll over has significant trading importance and the interest alone can determine profit or loss when the currency values are least fluctuating. Many day traders slightly delay their trades to benefit from rollover interest.
This blog is written for Orient Financial Brokers
, a leading online forex broker in UAE
offering a range of account features for traders.
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