What is Forex Rollover?

Businessman Rolling Boulder Up Hill

Forex is an international market where the regularly traded volume is more than $4 trillion. Smart people from different parts of the world are doing smart business with the fluctuations of currency rates — and significant profits can be generated.

When looking at the types of common trading strategies and the duration of the trades, Forex trading has been divided into 4 major groups:

  • Day Trading
  • Position Trading
  • Swing Trading
  • Scalping

Rollover comes into play when traders are involved in position trading or swing trading. Brokers charge a certain percentage for carrying overnight trades, and this is usually referred to as rollover. Every currency has its own interest rate and since the forex is traded in pairs rollover is made in order to mitigate the difference of interest rate of two currencies. Swing traders and position trader always take this into account while trading in high volumes since it has a direct impact on their profit percentage.

There are two types of rollover

  • Positive rollover
  • Negative rollover

To be precise, buying the higher interest rate currency means positive rollover while selling it means negative rollover. For positive rollover, you get paid — and for negative, you need to pay. If you are long in high yielding currency then you can expect to have positive rollover, which will be automatically calculated by your broker. Though the rollover charge is applicable during the active trading session, most of the liquidity providers incorporate this charge during weekend holidays.

Due to advanced trading platform offered by the different broker, the rollovers are automatically calculated based on the currencies interest rates. The amount you are paying as a rollover charge are also shown on your trading platform. You can also calculate the rollover charge by calculating the difference of currencies interest rate.  In general, Traders are subject to rollover charge after 5 PM EST but it might vary from broker to broker. The most important fact about the rollover is, it’s not related to your leverage. Advanced traders can increase their profit margin by the help of positive rollover when they buy high yielding currency.

 

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