Rollover is the action taking place at the end of the day, where all open positions with value date equals SPOT, will be rolled over to the next business day. This happens since in FX trading the trader doesn’t want to actually buy the traded currencies but to continue to trade until the position is closed.
On Monday all positions with a value date of Wednesday (in case of T+2) will be rolled over and the value date will be updated for Thursday. The position with a value date of Friday will be updated with the value date of next Monday.
Trading platforms offer rollovers but the process involves a rollover interest fee which is calculated according to the difference between the interest rates of the traded currencies. If the interest rate on the trader’s long position is higher than the rate on the short position, the trader receives the interest. If the interest rate on the trader’s short position is higher than the rate on the long position, then the trader pays the interest. For weekends and holidays, the rollover is multiplied by the number of days of rollover.
SPREAD FROM
WELCOME BONUS
DEPOSIT BONUS
LEVERAGE
If we assume that the interest rates in Japan and the US are 0.3% p.a. and 3% p.a. respectively, and you have a buy position of 1 lot in USDJPY at 120, you will earn 3% per year on your USD and pay 0.3% per year on your borrowed JPY.
This means that with an open position you gain USD 7.4 per day [100,000* (3%-0.3%)/365]. This amount is credited to your account and equivalent to 0.89 pips per day [120* (3%-0.3%)/365]. Similarly, if you have a short position in USDJPY, you lose USD 7.4 per day. Thus rollover interest can provide an added stream of profit or loss for you.