Although there is no rollover on Saturdays and Sundays when the markets are closed, banks still calculate interest on any position held over the weekend. To level this time gap, XM applies a 3-day rollover strategy on Wednesdays. Rollover is the process of extending the settlement date of an open position i.
The forex market allows two business days for settling all spot trades, which implies the physical delivery of currencies. In margin trading, however, there is no physical delivery, so all open positions must be closed daily at end-of-day This pushes out the settlement by one more trading day. This strategy is called rollover. Rollover is agreed on through a swap contract which comes at a cost or gain for traders. Every currency trade is based on borrowing one currency in order to buy another.
Interest is paid on the borrowed currency and earned on the purchased currency. For instance, if we assume that the interest rates in Japan and the US are 0. This means that with an open position you gain USD 6.
Following current interest rates. About Rollover Rollover is the process of extending the settlement date of an open position i. Calculating Rollover Every currency trade is based on borrowing one currency in order to buy another.More...