Rollover or Swap is the interest paid or earned for holding a position overnight. Each currency has an interest rate associated with it, and because forex is traded in pairs, every trade involves not only 2 different currencies, but their two different interest rates related to the specific country. If the interest rate on the currency you bought is higher than the interest rate of the currency you sold, then you may earn rollover (positive roll). If the interest rate on the currency you bought is lower than the interest rate on the currency you sold, then you may pay rollover (negative roll). Rollover can add a significant extra cost or profit to your trade. In addition, because Swaps are tradable securites in the Foreign Exchange industry, the amount of swap charged or earned may be affected by volatility and liqudity.
5 pm EST/EDT is considered the beginning and end of the forex trading day or as commonly known as the Trade Date. Any positions that are open at 5 pm sharp are considered to be held overnight, and are subject to rollover. A position opened at 5:01 pm is not subject to rollover until the next day, while a position opened at 4:59 pm is subject to rollover at 5 pm. A credit or debit for each position open at 5 pm appears on your account within an hour, and is applied directly to your accounts balance.
For example, a EUR/USD position would entail the interest rates of the European Union versus the US. If the trader does not wish to earn or pay rollover on their established trade(s), simply close the position(s) before 5pm EST/EDT, the end of the Trade Date.
Weekends and Holidays: Most banks across the world are closed on Saturdays and Sundays, so there is no rollover on these days, but most banks still apply interest for those two days. To account for that, IKON GM Royal Division books 3 days of rollover on Wednesdays, which makes a typical Wednesday rollover three times the amount on Tuesday.
Trading Off-Exchange Foreign Exchange Currencies involve significant risk and may not be suitable for everyone. Please read our RISK DISCLAIMER before investing.
