Rollover
Tue, Apr 15Rollover refers to the process of transferring open positions from one trading day to the next. Most brokers and trading platforms handle this rollover automatically by closing any open positions at the end of the trading day and simultaneously opening an identical position for the next business day.
During the rollover, a swap is calculated. A swap is a fee that may either be paid or charged to you at the end of each trading day if you keep your trade open overnight. If you receive a swap, cash will be added to your balance. Conversely, if you are charged a swap, cash will be deducted from your balance. This swap fee is also known as an “overnight financing fee” or “overnight financing charge.”
Unless you are trading large position sizes, these swap fees are typically small but can accumulate over time. For instance, for EUR/USD, if the swap rates are 0.637/1.05, holding a long position of €10,000 would incur a charge of $1.05 for overnight holding. Conversely, if you sell EUR/USD for €10,000, you would receive $0.64 overnight. These amounts are then converted back into your base currency.
In the spot forex market, trades must be settled within two business days. For example, if a trader sells 100,000 pounds on a Monday, they must deliver 100,000 pounds by Wednesday unless the position is rolled over. All open forex positions at the end of the day (5:00 PM New York time) are automatically rolled over to the next settlement date.
The rollover adjustment is essentially the accounting of the cost-of-carry on a daily basis.
Recommendation
R-Star
R-Star, often represented as r∗, signifies the "natural rate of interest." This concept is used in economics to denote the ideal interest rate for an economy. It reflects the rate at which the economy can grow at its maximum potential, characterized by full employment and stable inflation. R-star can be compared to the Goldilocks rate—neither too high nor too low. It indicates a balanced condition where the economy is functioning optimally—not too hot (which could lead to high inflation) and not too cold (which would cause high unemployment).
Rally
A rally is defined as a rebound in price following a period of decline. It represents a phase where the price of an asset experiences consistent upward movement. Typically, a rally occurs after a timeframe in which prices have remained stagnant or have decreased.
Range Trading
Trading ranges refer to periods when a financial instrument experiences sideways price movement, fluctuating within a defined price band. During such periods, the market lacks a clear trend, oscillating between support and resistance levels. Traders can capitalize on these price movements by implementing a range trading strategy. Let’s explore the concept of trading ranges and provide insights into successful range trading.
Range-Bound Market
A Range-Bound Market, often called a choppy market or noisy market, is characterized by price fluctuations that oscillate between a high and a low price.
Rate
The value of one currency expressed in relation to another currency.
Rate of Change (ROC)
The Rate-of-Change (ROC) is a technical indicator that quantifies the percentage difference between the current price and the price from x days prior. This indicator, often simply called Momentum, serves as a pure momentum oscillator.
