Rollover Fee

Rollover fee, also known as swap fee or overnight interest, is a cost or charge incurred when a position or investment is rolled over or held overnight in the financial markets.

In various financial instruments such as forex trading, futures contracts, or CFDs (Contracts for Difference), positions are typically opened and closed within the same trading day. However, if a position is held overnight, it may be subject to rollover fees.

Rollover fees are primarily associated with leveraged trading, where traders borrow funds from their broker to increase their trading position size. When a position is held overnight, the trader is essentially borrowing the funds for that period. As a result, the trader is required to pay or receive interest on the borrowed funds, depending on the interest rate differentials between the two currencies or instruments involved in the trade.

The rollover fee is calculated based on the interest rate differential between the two currencies or instruments and the size of the position. It is typically expressed as an annualized percentage rate and is adjusted for the number of days the position is held overnight.

If the interest rate of the currency or instrument being bought is higher than the one being sold, the trader will receive a credit or positive rollover fee. Conversely, if the interest rate of the currency or instrument being sold is higher, the trader will incur a debit or negative rollover fee.

Rollover fees can have a significant impact on the profitability of trades, especially for longer-term positions. Traders need to consider these fees when planning their trades and managing their risk.

It’s important to note that rollover fees can vary among brokers and are influenced by market conditions, interest rate differentials, and other factors. Traders should review the fee structure of their broker and understand the potential impact of rollover fees on their trading strategy.

Overall, rollover fees are a cost or charge incurred when holding positions overnight in leveraged trading and are based on the interest rate differentials between the currencies or instruments involved. Traders should consider these fees when evaluating the potential profitability of their trades.