Rollover on Forex.

Any trader who has to carry an open position over to the next day inevitably encounters this concept, so it's important to know what a rollover actually is and take its size into account when trading.

Rollover is the difference between the interest rates of the currencies that make up the currency pair used in a transaction. It can be either positive or negative, depending on the rate and the direction of the transaction.

Most traders are familiar with this term as a Forex swap , which is used by any forex broker.

Any currency pair is formed by two currencies, each with its own credit rate and deposit interest. Therefore, when conducting a transaction, one currency must be borrowed, while the deposit interest is accrued on the other. If the transaction is completed within 24 hours, these rates can be ignored, but it is not always possible to close the transaction within the allotted time at a favorable price. This is when rollover should be calculated.

You can find approximate rollover rates for various trading instruments in the article " Carry Trade, " which also includes a description of the trading strategy of the same name.

Rollover rates typically fluctuate around one percent, which does not significantly affect the financial result of the transaction. For example, if you are trading a popular currency pair like EURUSD, the commission for opening short positions is -0.09%, and the reward for long positions is +0.04% per annum. By dividing this figure by 365, you'll find out how much you'll have to pay (or receive) when rolling over a trade to the next date.

For example, if your deposit is $1,500, leverage is 1:100, the open sell trade size is 1 lot or €100,000, the spread between the rates is 0.9% per annum, and the current rate is €1.30, we can perform a simple calculation:

(100,000 x (-0.9)/100) x 1.30/365 = -3.20. This means you'll have to pay $3.20 daily to maintain this position, which isn't all that much when trading a 1-lot trade.

However, a buy trade can be profitable, resulting in additional profit.

However, it's important to remember that currency pair has the lowest rollover rate, while other instruments can have rollover rates several times higher.