Hi,
I have been looking into some broker to see which one to have an account with. But I am still not sure what is the meaning of rollover rates. Some broker offers 0 rollover rates some offer low rollover rates.
What do they mean specifically actually ?
Any help would be great.
Thanks.
Hi munchu,
The [B]Babypips Forexpedia[/B] (where you would normally start with a question like this) is not very helpful on this particular subject. So, here is a link to a useful article from another source: Understanding Rollovers and Interest Rates in Forex Market
And here is a recent forum post on the related subject of the “carry trade”: 301 Moved Permanently
The [B]Babypips School[/B] has an excellent article on the workings of the carry trade:
How the Carry Trade System Works in Forex Currency Trading
On Friday, I closed a LONG GBP/JPY trade which had been open for several days. In this case, I earned interest each day at
5pm EST, because I was LONG this pair, and UK interest rates currently are higher than Japanese interest rates.
But, if I had been SHORT the GBP/JPY, then I would have been charged this interest amount.
Consider this: most forex traders trade both LONG and SHORT, and many trade about equally in both directions. This means that [B]interest earned tends to cancel interest paid over the long term[/B]. In other words, for many traders the interest roll-over is not a factor to be considered in trading. Sometimes you earn it, and sometimes you pay it.
Once in a decade, or so, an opportunity might come along like the yen carry trade of several years ago. But, generally, you can’t just open up your trading platform and expect to find a great carry-trade opportunity.
I hope this helps.
Clint
Hi Clint thank you for your reply. I read through the forum that you sent to me on the link and went to check on some current world interest rate.
I am currently now looking to open an account with FXDD, they have 0 rollover rates, does that mean I would not be earning/losing money in terms of the difference in interest of the both currency I am trading ?
fxdd.com/en/forex-trading-tools/rolloverrates.html?no_cache=1
Hi munchu,
Yes, that is what it means [B]for now[/B]. The FXDD website says:
"The rollover rates posted below are indicative rates and are subject to change based upon market volatility."
In addition, you can be sure that these rates are also subject to change as international interest rates change.
So, maybe a year from now rollover rates at FXDD will be comparable to every other broker.
If you are trying to avoid interest payments/charges for religious reasons, you might want to consider carefully that
[B]the current FXDD policy might not be permanent.[/B]
Clint
Swap rates, also known as overnight or rollover rates, are debits or credits, either earned or paid for holding a position overnight. Be aware, as clint said, that those rates are subject to change as international interest rates change.
My broker ACM has a list of the rates for each currency pair published on their site, so there is no surprises when keeping a position open during the night.