Forex trading, or foreign exchange trading, is a highly volatile and rapidly changing market. As a result, traders must be aware of important dates and times, such as when rollover begins. In this article, we will explore when rollover begins on forex and what it means for traders.
What is rollover in forex?
Before we dive into when rollover begins, it’s important to understand what rollover is in forex. Rollover, also known as swap, is the interest paid or received by traders who hold positions overnight. It is the difference between the interest rates of the two currencies being traded.
For example, if a trader buys EUR/USD, they are essentially buying euros and selling US dollars. If the interest rate for euros is higher than the interest rate for US dollars, the trader will receive a positive rollover. Conversely, if the interest rate for euros is lower than the interest rate for US dollars, the trader will pay a negative rollover.
When does rollover begin?
Rollover begins at 5:00 pm EST (Eastern Standard Time) on every trading day. This time is also known as the rollover or swap time. This means that any position held after 5:00 pm EST will be subject to rollover.
It’s important to note that the forex market operates 24 hours a day, five days a week. Therefore, rollover occurs every day except for weekends. If a position is held over the weekend, rollover will occur on Wednesday, as the interest rates for the weekend are applied on Wednesday.
How is rollover calculated?
Rollover is calculated based on the interest rate differential between the two currencies being traded, as well as the size of the position being held. The calculation for rollover can be complicated, but most forex brokers provide a rollover calculator on their platform.
The rollover amount is typically expressed in pips, which is the smallest unit of measurement in the forex market. One pip is equal to 0.0001 for most currency pairs. For example, if a trader holds a position of 100,000 EUR/USD and the rollover rate is 0.5 pips, the trader will receive or pay $5.00 for holding the position overnight.
Why is rollover important?
Rollover is an important factor to consider when trading forex, as it can affect a trader’s profit or loss. If a trader holds a position for a long period of time, the rollover fees can accumulate and eat into their profits. On the other hand, if a trader is receiving positive rollover, it can add to their profits.
Traders should also consider the interest rate differential when deciding which currency pairs to trade. If a trader is buying a currency with a higher interest rate and selling a currency with a lower interest rate, they may receive positive rollover. This can be an attractive option for traders looking to earn passive income on their trades.
Conclusion
In conclusion, rollover is an important aspect of forex trading that traders must be aware of. Rollover begins at 5:00 pm EST every trading day and is calculated based on the interest rate differential between the two currencies being traded. Traders should consider the rollover fees when holding positions overnight and the interest rate differential when deciding which currency pairs to trade. By understanding when rollover begins and how it works, traders can make more informed trading decisions and potentially increase their profits.
