What is Forex Rollover?

When you are Trading Forex, Rollover is the interest paid or earned for holding a position overnight. Each trading currency pair has an interest rate associated with it, and can add significant extra cost or profit to your trade.

When is Rollover booked?

5 p.m. in New York is considered the beginning and end of the trading currency day. Any positions that are open at 5 p.m. sharp are considered to be held overnight, and are subject to rollover. A position opened at 5:01 p.m. is not subject to rollover until the next day, while a position opened at 4:59 p.m. is subject to rollover at 5 p.m.

A credit or debit balance for each positon open at 5 p.m. appears on your account within an hour, and is applied directly to your account balance.

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Example:
When you buy the EUR/USD pair, you are buying the euro and selling the U.S. dollare to pay for it. If the euro interest rate is 4.00% and the U.S. rate is 2.25%, you are buying the currency with the higher interest rate, and you will earn rollover -- about 1.75% on an annual basis. If you sell the EUR/USD pair, you are selling the currency with the lower interest rate and you will pay the rollover -- about 1.75% on an annual basis, since you are paying euro interest rate and earning the U.S. interest rate.

One of the most popular trading currency strategies in the twenty first century has been the "Carry Trade". The "Carry Trade" takes advantage of both the differences in interest rates between countries and the high available leverage of the forex market.*

* Leverage is a double-edged sword and can dramatically amplify your profits. It can also just as dramatically amplify your losses. Trading foreign exchange with a high or even moderate level of leverage may not be suitable for all investors