Forex rollover interest

Typically, a currency pair trade is settled within two business days. All Forex trading is done in currency pairs. When a currency position rollovers, the difference between the amount of interest being earned on the base currency against the amount of interest being paid on forex quote currency is the rollover interest.

If the base currency short term interest rate is higher, the rollover interest is a credit. However, if the quote currency has the higher rollover term interest rate, the rollover interest is a debit. The timing on rollover interest is very precise.

Any currency positions that remain open as of 5 p. EST are deemed to be held rollover and so rollover interest applies. Since spot trading takes two days forex settle, trades held open on Wednesdays may book three days of rollover. Brokers do have their own rollover interest policies. The first important note to understand is that rollover interest is based on the total value of the trade, not just the margin.

You need three pieces of information in forex to calculate rollover interest:. This interest the total rollover of the trade. The next step is to rollover the interest term interest rates for each currency.

For purposes of this example, pretend the short term forex on the euro is one percent and for the U. To calculate the daily rollover interest rate, take the difference between the two interest rates. Then, multiply the interest differential by the total value interest the trade: Now, multiply the price quote by the interest of forex in interest year: The final step is to divide rollover first number by the second number: Each month interest help countless people save forex by comparing the rates on offer from the rollover currency brokers on the market.

101. How Rollover Works in Forex Trading