With the FXCM platform, is the rollover fee determined by currency interest rate or by volume traded?
For example if 60% of people are short the EUR/USD then shorting it will result in negative rollover whereas if the 35% of people are long the GBP/USD then you will earn positive rollover?
It’s crazy how much the rollover fee can eat into your profits once you’ve had a trade open for a few weeks.
Roll over can differ from broker to broker some brokers dont even offer roll over at all. It is supposed to be based on interest rate differential. That is how FXCM does it. They base it off interest rate differentials.
I will say if roll over is eating away at your profits enough to cause a concern then I would consider that a stagnant trade and would probably look to cut out. If you plan to hold a trade for a period of time then you should factor roll over in your trade plan. Especially a lot of the market has been relatively flat especially cable and fiber. When price trades in a small range like this holding trades long term can be tricky unless you are on the right side of the interest rate deferential.
Thanks bobmaninc,
I closed the trades on Friday. Not as much profit as I was hoping for but you were right, the markets were pretty stagnant throughout the week. They were moving but it was up 100pips, down 100pips, up 100pips, down 100pips etc.
Hi UKForex,
The rollover interest is determined by the interest rate differential between the two currencies of the pair your are trading. Keep in mind it works both ways. If you are long the currency in the pair with the higher interest rate (for example if you are long TRY/JPY or short USD/ZAR), then you earn the rollover interest instead of paying it. The strategy of holding a trade open to earn the swap is called carry trading.
The exact amount you can earn or pay is displayed in the RollS and RollB columns of your Trading Station platform. If you have a US-dollar denominated trading account, then the amounts shown are in US dollars. Euro-denominated accounts will display rollover amounts in Euros and so on.
The rollover interest shown in these columns is applied to any trades open at 5pm New York Time (multiplied by the number of lots you have open), regardless of how long the trades have been open. That means, if you buy TRY/JPY at 4:59 PM and close your trade at 5:01 PM on Tuesday, you can earn a full day’s worth of rollover interest, even though your trade was open only 2 minutes.
On the flip side, if you are a day trader who doesn’t want to worry about swap, then you can buy USD/ZAR at 5:01 PM Tuesday and close your trade at 4:59 PM on Wednesday and pay no rollover interest, even though your trade was open for 23 hours and 58 minutes.