A brief introduction to rollover fees and trading hours
In this article we will look at two different things, one is the rollover which is one of the techniques utilized in forex trading and the other is the trading hours and every forex trader should know about them.
Forex Method ֠Rollovers
Rollover refers to shifting of a traderӳ position in which the settlement date gets extended. In this kind of situation the position is not closed and the forex trader does not receive any money, what actually happens is that the position is rolled over to coming day. Most often forex brokers make use of automatic rollovers assuming that forex traders would want them.
Payment/Receipt of Rollover Fees
A rollover could require forex investors to pay rollover fees but may well result in traders getting rollover fees instead of paying. The fees that trader may get is computed by calculating the difference present between interest rate of two given currencies that make a currency pair. As a forex trader you will earn rollover fees in case the rate of interest on the base currency is higher than the interest rate on the quoted currency and may well have to pay the fees in case the opposite occurs.
On these rollover fees, the forex broker may keep a margin level equal to 1% & sometimes it may go up to as much as 2% also and with several traders looking for rollover fees, the earnings for a forex broker are substantial.
Forex Trading Hours
We all know that forex trading occurs 24 hours a day and most of us are attracted by the lure of extra profits that are possible due to prolonged trading opportunities available in forex markets. However, the trading hours are different from what is marketed and this is what we will look at in the next section.
Three Sessions of Trading
The trading in forex markets occurs in three sessions, namely the Asian, European, and the US. Each of the sessions overlaps the current running session and at such overlap time periods, the trading is lot more than at normal times. On every Sunday evening, forex market trading begins in Sydney & completes with closure of trading in the New York market.
The forex market is open 24 hours a day but you will find it to be less active during certain hours of the day. We will look at one instance when such a thing happens, the time between New York market close & opening of the forex market in Sydney is known to be quite dormant and the liquidity in this time period is also quite thin. During such time there is high spread and can reach 4 to 5 pips for any currency pair.
On the opposite the markets are quite volatile and also active when the session is going to end in Asia, Europe and US. Thus it is clear that having good knowledge of the market is quite essential if you want to establish your position in the market.
A Final Note
We would conclude here by saying that the forex market comprises of many different things and in the above-mentioned sections we have tried to explain two of those, the rollover fees and trading hours which will help you in your day to day trading activities.