In FX/CFDs trading, the roll-over period occurs at the end of the trading day, typically at 00:00 Trading Server Time (5PM New York close), when positions held by traders are carried over to the next trading day. Since Forex markets operate 24 hours, the roll-over period allows positions to remain open past the daily cut-off without being settled.
What Happens During the Roll-Over Period?
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Swap/Interest Charges: When positions are rolled over, traders may either earn or pay interest, depending on swap rate between the two currencies in the pair being traded. This is known as a swap or rollover rate.
Risks During the Roll-Over Period:
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Increased Spreads: Liquidity often drops during this period as major financial institutions in different parts of the world close for the day. This can lead to wider spreads (the difference between the bid and ask price), which can affect your profits, losses or increase the cost of entering/exiting trades. This may also increase the risk of being stopped out (liquidated) on open trades, depending on your account equity position & margin % level.
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Interest Rate Risk: If you're unaware of the swap rate between the currencies you're trading, you may incur significant swap costs, especially if holding positions long-term. These costs can erode profits. It is important that you are aware of the swap rate you may either earn or pay interest on, which you can see via the trading platform, under 'product specifications'.
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Market Gaps: Although Forex markets are continuous, sharp price movements or gaps can occur during the roll-over period due to low liquidity. This means the price at which your trade is carried over could differ significantly from the market price afterward, posing a risk if the market moves against your position.
To manage roll-over risks, traders should be aware of the above factors, ensure they have checked the relevant swap rates for products they are trading and monitor market conditions, especially during low liquidity times. It is the traders responsibility to manage their trading account and activity, in which Ox Securities does not manage this for traders.
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