What rollover means in the context of the Forex market?

Answer:

In the Forex market (FX) a rollover is the process of extending open position. In most currency trades, a trader must take delivery of the currency two days after the transaction date. However, by rolling over the position — simultaneously closing an existing position at a given day the closing rate and re-entering at the new opening rate the next trading day-the trader artificially extends the settlement term for the day.

Often referred to as tomorrow next, rollover is useful in the currency market because many traders have no intention of taking delivery of the currency they buy-rather they want to profit from changes in exchange rates. Since each Forex transaction involves borrowing one currency to buy another, receiving and paying interest is a common phenomenon. At the close of each trading day, a trader who took a long position in high-yielding currencies relative to the currency that they have borrowed will get the amount of interest in your account. On the contrary, the trader will have to pay interest if they borrowed the Currency has a higher interest rate relative to the currency they purchased. Traders who do not want to collect or pay interest should close out their positions by 5 PM et.

Please note that the interest received or paid by a currency trader in the course of these Forex trades is regarded by the IRS as ordinary interest income or expense. For tax purposes, the currency trader should keep track of interest received or paid separate from regular trading gains and losses.

For more information, see a primer on the Forex market, getting started in Forex and a top 6 questions about currency trading .

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