In our last lesson we continued our free forex course by introducing the concept of rollover. In today's lesson we are going to continue our discussion on rollover with a look at how we know when we will be paying or receiving interest for holding positions overnight, and how much that will be.
Another nice feature of the platform we are using here is that it is very transparent in the way that rollover is done. As this is one of the more complicated things about trading forex, some firms will take advantage of trader's lack of understanding, and charge them more than they should when the trader is long the currency with the lower interest rate and pay them less than they should when the trader is long the currency with the higher interest rate.
To see what I am talking about lets login to our free real time demo accounts. If you have not done so already I encourage you to click the link above this video if you are watching onInformedTrades.com, or to the right of this video if you are watching on YouTube, and register for a free demo so you can follow along as well.
Once you are logged into the platform change the dealing rates window from advanced to simple view by clicking the simple dealing rates tab in the upper right hand corner of the window. Once you do this scroll over to the right and you will see two columns which say Roll S and Roll B. Roll S stands for the Roll amount you either pay or receive if you sell to enter the trade, and Roll B stands for the Roll amount you either pay or receive if you buy to enter the trade.
If the number beside the currency pair and under the appropriate roll column has a positive number, then this is the amount in US Dollars that will be credited to your account, per contract, for any position held past 5pm NY time. If the number is negative this this is the amount that will be debited from your account, per contract, for any position held past 5pm NY time.
Remember if you open and close a position before 5pm NY time then the position does not need to be rolled over, so your account will not be debited or credited.
As a quick example lets say I want to know the amount of interest that I will either pay or receive if I buy 2 contracts of GBP/JPY, and hold that position past 5pm NY time. All I would do here is scroll down to GBP/JPY and then over to the ROLL B column of the platform where I see that as of this lesson I would earn $50 per contract. Since in this particular example I am trading 2 contracts I would earn $100 for holding that position past 5pm NY Time.
Once this trade is opened and held past 5pm NY time the interest credit will show up in the "Roll" column of the platform.
One last thing that it is important to understand about the logistics of rollover is that trades held past 5pm NY Time on Wednesday take into account the weekend interest when the market is closed, so the rollover amounts are going to be triple on that day. Also if there is a banking holiday in one of the countries whose currency you are trading, then this will affect the role amounts as well.
The important thing to understand however is that all you need to do to know how much you will either pay or receive for holding a position past 5pm NY time is look in the Roll S and Roll B columns of the platform.
As you can probably tell from this lesson, because interest rates cause currency traders to either earn or pay money for holding positions, they have a dramatic affect on the value of currencies, something which we will talk more about in our next module. For those of you who have heard of the carry trade, this comes from the concept we have learned about here today, where traders buy currencies with high interest rates and sell currencies with low interest rates to earn the interest rate differential or carry.
For your homework assignment tonight I encourage you to place a few trades in different currency pairs, and hold them past 5pm NY time so you can see how the rolls work. As you do this think about the power of leverage and what you could potentially do using some of the leverage available to you to try and bolster the returns from the rolls if you are long the currency pair with the higher interest rate.
Thats our lesson for today. In tomorrow's lesson we will have a look at the free real time charts that are available to us on the platform and some of the neat features there, so we hope to see you in that lesson.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
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