Rollover definition
Rollover
A rollover in forex is the action of keeping your position open from one trading day to the next, hence the name “rolling over”. In a rollover, you technically close your position at the end of the trading day and re-enter the trade at the new open rate. This usually happens automatically.
In the forex market, which is open 24 hours 5 days a week, rollover occurs at the close of the New York trading session—5 pm ET. Rollover rates are multiplied by three on Wednesdays to make up for the two days the market is closed.
How are rollover rates calculated?
Rollover rates can be positive or negative depending on the direction of your trade and the interest rates of both currencies in the pair you are trading. To determine your rollover rate for a buy trade, subtract the interest rate of your base currency from that of the quote currency. Divide that amount by 365 to calculate your base exchange rate. For sell trades, switch the base and quote currency positions.
Some traders base their forex strategy around rollover rates by exchanging a low-interest currency for a high-interest one, thereby increasing their gains through the positive interest rate differential. This is known as a carry trade.
TRY Financing
It's important for traders to be aware of the unique characteristics and risks associated with trading Turkish Lira (TRY) pairs such as EURTRY, USDTRY, and TRYJPY due to the high volatility of the currency.
One crucial aspect traders should consider is the swap rates. A swap rate is the interest rate differential between the two currencies in a currency pair and is applied when holding positions overnight. Depending on the prevailing interest rates in Turkey and the other currency's country, traders may either receive or pay swap fees* when holding LONG or SHORT positions in TRY pairs overnight.
However, the high volatility in TRY pairs can result in larger and more frequent swings in the interest rate differential, leading to situations where traders may need to pay swap fees instead of receiving them.
Please note that market conditions, economic factors, and geopolitical events can impact all currency pairs to varying degrees, and each pair comes with its unique set of risks.
*The swap fee is called Financing (Forex.com Platforms), and Swaps (MetaTrader Platforms) on the customer statements.