Rollover (Swap) in Forex Trading - SoftLearnOnline
What is Rollover?
Rollover, also known as swap, is the interest paid or earned by a trader for holding a position open overnight in the forex market. Rollover is the result of the difference between the interest rates of the two currencies in a currency pair.
How Does Rollover Work?
When a trader holds a position open overnight, they are essentially borrowing one currency to buy another. The interest rate on the currency being borrowed is subtracted from the interest rate on the currency being bought to calculate the rollover.
For example, if a trader is long the AUD/USD currency pair, they are essentially borrowing Australian dollars to buy US dollars. If the interest rate on the Australian dollar is 2.5% and the interest rate on the US dollar is 0.5%, the trader will earn a positive rollover of 2% for holding the position overnight.
When Does Rollover Occur?
Rollover occurs at the end of the trading day, which is typically at 5:00 PM EST. At this time, any open positions will be rolled over to the next trading day, and the interest will be added or subtracted from the trader's account.
Trade is Started Again
Once the rollover has occurred, the trade is considered to have started again for the new trading day. The trader will continue to earn or pay rollover until the position is closed.
