The Dreaded Danger Of Rollovers

Suppose you are trading a currency pair on a 4 hour time frame.

Now suppose the trade is good and you go [U]long [/U]and it will ultimately be a nice success after, say, 2 days. You have also set your stop loss correctly.

However, shortly after the trade, the price action temporarily goes into negative territory for a while, ie you are temporarily in loss teritory. (The price will change later putting you in profit).

Now [U]rollover time [/U]comes and just at this time you are still in [U]loss [/U]teritory.

[B]Question [/B]:confused:

                                1) Do you not incur a debt from the rollover interest?
                                2) In this case above, does it really make a difference which country has the higher interest rate - after all, you are at a loss position - so a debt is incurred either way?
                                3) Does not such a debt kill any profit you hope to make anyway - the debt and profit could cancel each other out.
                                4) Does this not mean that you had better be in profit teritory in the first 12 hours or your hopes of making a profit are dead!!:eek: 

Answers from people who know what they are talking about would be really appreciated.

Kind regards, Tymen Wortel, Perth, Western Australia.

My son has realized the same problem.

I told him not to put himself in the position and he will have no problem.

Sometimes he listens, sometimes he doesn’t.

I would agree with what Hobbit said … the roller over is not a huge sum of money. If you are worried your profits will be negated by the rollover, you aren’t making much profit. I think the rollover is barely a pip or two for most pairs on a daily basis, with many of them in the positive.

If you are so worried about losing rollover, you can get out at 4:59 eastern time, and get back in at 5:01. You avoid the roll over, but now you have to pay the spread all over again.

say what? I thought rollover/swap/daily interest was only dependent upon your original entry position, not your current equity on that position. It doesn’t matter if you are in negative or positive territory.

Thank you for your replies so far but i am experiencing other things.

I have had one case where i was 70 pips down (loss territory). Such may be the situation if you have set a stop loss of say 100 pips on a 4hr chart.

Now on this case it was rollover time and i was debited another 70 pips worth.
So now i was down a whole 140 pips.:eek: That was one big rollover debt.:mad:

I closed the position shortly after as the price action was just getting worse.

I suppose in a case like this you could cut out your stop loss and wait (24 hrs till the next rollover) for the trend to reverse and go back in your favour but that could also be a dangerous move as the trend could worsen against you as it was in my case.

Kind regards, Tymen Wortel, Perth, Western Australia.

It is. You are correct.

Can you tell us what pair you were trading?

If it’s one of the majors or primary crosses, that figure isn’t right. Either your broker is screwing you or you’re misinterpreting something.

Thank you for your reply Rhodytrader,

I was trading AUD/JPY. It happened on the 24th April this year.
I spoke to my broker (Hallifax). They run the GFT Forex program and told me much the same as what I see in the postings on this thread. I told them something did not make sense then and they agreed. So i will try to pull up the statement.

The statement is on this post as an attachment (zipped file). I put it thro Microsoft Paint to highlight the important parts.

The light blue strip is my entry - going short entry at 98.09
The 2 yellow strips are the roll open and roll close. As you can see the pip change on those 2 strips is from 98.09 to 98.0698 - a shift of merely 2 pips. Stevemcg posted on this thread to say that a shift of only 2 pips ia about normal.

BUT THE DEBT INCURRED IS $202 when i am only trading 1:100, ie a leverage of $10 per pip.:mad:

The green strip is where i closed my trade at 98.27.

The difference between entry and exit (15 pips + 5 spread =23 pips) giving a loss of another $202 makes sense (blue strip/green strip) with a $10/pip leverage.


detailed (61.4 KB)

Here’s something important to understand that I think is what’s causing the confusion. Rollover means exiting your open position, then opening a new one the same size. So here’s what happened.

  1. You shorted at 97.89
  2. At rollover your short was closed at 98.09, a 20 pip loss or $202.20
  3. A new short was entered at 98.0698
  4. You closed the trade out at 98.27, another 20 pip loss or $202.41

You can think of it this way. You went short at 97.89 and exited at 98.27 or a 38 pip loss. When you add in the about 2 pips for the rollover you get to a 40 pip loss, which is right in line with what you see on your statement.

To Rhodytrader,

Ahhhhh!..the Master contributor instructs the newbie.:slight_smile:

If ever there was an example of this forum being helpful to users then this posting by Rhodytrader is such a case.:slight_smile:

I understand the matter much more clearly now…you could not have put it in simpler terms and i am totally grateful for your input on this matter. I do not know how else i could have received this information.

Thank you for taking the trouble to look closely at the attachment and do the interpretations. I have not yet spoken to my broker (it is midnight here) and what else can he possibly offer in explanation anyway.

So thank you again Rhodytrader for instructing me, a newbie.

If anyone else wishes to post on this thread, then may they do so, otherwise, the problem is solved and it would seem to me, to be appropriate to close this thread.

Kind regards, Tymen Wortel, Perth, Western Australia.

I had a think last night and i would like to add a final analysis by comparing the stockmarket with forex.

Lets say you enter (long) on day one and your trade goes down and you are $50 down.
What happens?..nothing - you just wait.

The next day your trade goes up to your entry position again (yippee!). It then goes up another $20 and you sell.
[U] Grand Total[/U]…$20 profit. :slight_smile:

Now compare :

Lets say you enter (long) on day one and your trade goes wrong and you are 50 pips down.
What happens?..lets say rollover time.

                                                    trade closed.............-50 pips
                         rollover and trade reopened......................-2 pips

                                                             total so far.......-52 pips

The next day your trade goes up to your entry position again (yippee!). It then goes up another 20 pips and you close the trade.
result…+20 pips

                                          [U] Grand Total[/U].................-32 pips.:( 

The stockmarket Grand Total is superior (profit) to the forex Grand Total. (loss).

As i see it then, the rollover is an unnecessary interference in your trading.:mad:
True it only adds or subtracts 2 pips, but the rollover shuts down your trade and starts a new one. Now this is very inconvenient if you are in loss territory at the time as the above example shows. It becomes an obstacle to trading by producing a loss just when you did NOT want to close your trade.

Of course, if you are in profit territory, the close and re-open does not affect you - you just gain 2 extra pips.

But, on the whole, trades do go against you, even if only for a part of the trade. In the share market, with no rollovers, you can safely ride out the negative territory by just waiting for the share to go your way again. To me, this is preferable because you do away with the disadvantages of the rollover, even though you miss out on the profits therefrom if in profit territory.

I would rather not have rollovers - to me they interfere with your trading.

Of course, we do have rollovers in forex, and that is why i consider the share market superior. The absence of rollovers is a major reason why i have made large profits in the sharemarket. I am now struggling to do likewise in forex.

A major decision for me is pending…

Regards, Tymen Wortel, Western Australia.

It should be noted that not all brokers do rollover in that fashion. Some, like Oanda, just charge or credit you with the daily interest rather than going through the whole process of opening and closing trades each day.

Of course, if you’re a day trader not carrying positions overnight you don’t really care about all this stuff. :slight_smile:

I can be wrong as i am pretty new to this, but i think that you are accounting for this situation wrong, Let me apply some figures to illustrate…

You open your long position at 163.00 for EUR/JPY…from here the position sinks to 162.80 for a -20 pip loss for the day, then the position rolls over, it closes your position for a -20 pip loss and reopens your position at 162.78 (to reflect the -2 pips for the rollover) the next day, your trade goes back up to the purchase price (+22 pips to get to 163.00) then goes up another 20 where you close it at 163.20.

In this scenario you come out with a net gain of 20 pips,

Man, now i am confusing myself a little bit, but i think that what you forgot to account for in your example was that it doesnt close your open position for a 20 pip loss, then reopen your position at the same place you originally did (163.00)…it closes the position then reopens you around where it was closed (162.78), not where your original purchase was…

Hope this helps, if i am totally wrong please let me know…like i said, i am just trying to understand this complicated subject as well.

To Wackico,

You are quite correct in your posting. I realized my error later when i went for a walk in the park. However, once you click “submit reply” your posting goes online and i don’t think you can edit it then.

To correct my work then :


Trade entered day one, goes wrong and closed at…-50 pips
rollover…-2 pips

Trade re-opened and goes back to entry…+52 pips
Trade goes 20 pips more and closed…+20 pips

[U]Grand Total[/U]…+20 pips profit.

Yep, you are totally correct.

Yet i still consider the rollovers and unnecessary interference in forex trading.
If you were it open the zipped file on my other posting, you will see how complex the statement appears - made much more so by the rollover. A big debit is slammed in your face to scare you.:eek:
This debit can discourage you from proceeding further.

When i realized my error, i was expecting Rhodytrader to pick it up but he was giving further worthwhile information.

I have decided, after considering many things, to return to the sharemarket.
Hallifax, my broker, was sorry to see me go, they have given me excellent service and even a fair amount of advice and have left my demo account open for me to practise further.
I was making good profits in the sharemarket but in forex nothing but losses. So i have decided that i am not ready yet and will continue to work on the demo account. Longer time frames, the larger market of USD/EUR instead of AUD/JPY and …and…
…candlesticks are looking the way to go…

Kind regards, Tymen Wortel, Perth, Western Australia.