SwingTrader1
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Rollover
Is the difference between two currencies.
My example will not use CURRENT rates but nice round numbers to help make the point.
First we'll do a quick review using the EUR/USD
When you buy a currency pair what you are doing is buying the euro and simultaneously selling the usd. When you sell a currency pair what you are doing is selling the euro and simultaneously buying the dollar.
Now that we know what happens when buying or selling a currency pair we can figure out rollover.
Using the EUR/USD lets say the cental bank rate for the Euro is 7% and the cental bank rate for the USD is 2%
Rollover is calcualetd by subtracting the currencies central bank rate of the subordinant currency from dominant currencies central bank rate.
Example when you buy the EUR/USD rollover would be calculated like this
7% -2% = 5% that means that if a trader is eligible for rollover they are entitled to 5% of the lot size they are trading based on 365 day year.
If a trader sold the EUR/USD with the same central bank rates then it would be the exact opposite.
2% - 7% = -5% or rather the trader would be obligated to pay rollover of 5%
Couple of points.
If a trader does not have any open positions after 17:00 EST they will not be charged or receive rollover. Rollover is for overnight positions in the market.
The amount of rollover a trader receives is based upon what tier they are trading with their broker. In a nut shell the more money and less leverage a trader uses the more rollover a trader will pay or receive.
Rollover is a significant factor for swing and position traders.
Is the difference between two currencies.
My example will not use CURRENT rates but nice round numbers to help make the point.
First we'll do a quick review using the EUR/USD
When you buy a currency pair what you are doing is buying the euro and simultaneously selling the usd. When you sell a currency pair what you are doing is selling the euro and simultaneously buying the dollar.
Now that we know what happens when buying or selling a currency pair we can figure out rollover.
Using the EUR/USD lets say the cental bank rate for the Euro is 7% and the cental bank rate for the USD is 2%
Rollover is calcualetd by subtracting the currencies central bank rate of the subordinant currency from dominant currencies central bank rate.
Example when you buy the EUR/USD rollover would be calculated like this
7% -2% = 5% that means that if a trader is eligible for rollover they are entitled to 5% of the lot size they are trading based on 365 day year.
If a trader sold the EUR/USD with the same central bank rates then it would be the exact opposite.
2% - 7% = -5% or rather the trader would be obligated to pay rollover of 5%
Couple of points.
If a trader does not have any open positions after 17:00 EST they will not be charged or receive rollover. Rollover is for overnight positions in the market.
The amount of rollover a trader receives is based upon what tier they are trading with their broker. In a nut shell the more money and less leverage a trader uses the more rollover a trader will pay or receive.
Rollover is a significant factor for swing and position traders.
