Rollovers in Forex

Even though the mighty US dominates many markets, most of Spot Forex is still traded through London in Great Britain. So for our next description we shall use London time. Most deals in Forex are done as Spot deals. Spot deals are nearly always due for settlement two business days later. This is referred to as the value date or delivery date. On that date the counter parties theoretically take delivery of the currency they have sold or bought.

In Spot FX the majority of the time the end of the business day is 21:59 (London time). Any positions still open at this time are automatically rolled over to the next business day, which again finishes at 21:59.

This is necessary to avoid the actual delivery of the currency. As Spot FX is predominantly speculative most of the time the traders never wish to actually take delivery of the currency. They will instruct the brokerage to always rollover their position.
Many of the brokers nowadays do this automatically and it will be in their policies and procedures. The act of rolling the currency pair over is known as tom.next, which stands for tomorrow and the next day.

Just to go over this again, your broker will automatically rollover your position unless you instruct him that you actually want delivery of the currency. Another point noting is that most leveraged accounts are unable to actually deliver the currency as there is insufficient capital there to cover the transaction.

Remember that if you are trading on margin, you have in effect got a loan from your broker for the amount you are trading. If you had a 1 lot position you broker has advanced you the $100,000 even though you did not actually have $100,000. The broker will normally charge you the interest differential between the two currencies if you rollover your position. This normally only happens if you have rolled over the position and not if you open and close the position within the same business day.
To calculate the broker's interest he will normally close your position at the end of the business day and again reopen a new position almost simultaneously. You open a 1 lot ($100,000) EUR/USD position on Monday 15th at 11:00 at an exchange rate of 0.9950.

During the day the rate fluctuates and at 22:00 the rate is 0.9975. The broker closes your position and reopens a new position with a different value date. The new position was opened at 0.9976 - a 1 pip difference. The 1 pip deference reflects the difference in interest rates between the US Dollar and the Euro.

In our example your are long Euro and short US Dollar. As the US Dollar in the example has a higher interest rate than the Euro you pay the premium of 1 pip.

Now the good news. If you had the reverse position and you were short Euros and long US Dollars you would gain the interest differential of 1 pip. If the first named currency has an overnight interest rate lower than the second currency then you will pay that interest differential if you bought that currency. If the first named currency has a higher interest rate than the second currency then you will gain the interest differential.

To simplify the above. If you are long (bought) a particular currency and that currency has a higher overnight interest rate you will gain. If you are short (sold) the currency with a higher overnight interest rate then you will lose the difference.
I would like to emphasise here that although we are going a little in-depth to explain how all this works, your broker will calculate all this for you. The purpose of this article is just to give you an overview of how the forex market works.
Good Trading

Forex Investing Tactics That Bring Money

Are you an investor who is looking for the ways that will bring you regular income? Have you already participated in the stock market and now would like to try foreign exchange? Actually, the stock market does differ from the foreign exchange investing. The point is that the strategies used in both markets are not similar. Therefore, many people are afraid of forex market. The majority of them consider forex to be too difficult and risky.
But what if I said that there is such a powerful method which despite of risk can bring you easy money, forgetting the fact that you know nothing about the foreign exchange and its possibilities? Do you have any desire to get acquainted with this technique?
We would like to introduce you a strategy which can do this for you. The key concept to get to know is that these strategies do not teach you how to trade in foreign exchange market. We suggest you winning software which will teach you how to register your account at any brokerage you choose. Then this account will sell and buy everything for you on the trade market.
In reality, forex is suitable for those investors who are interested both in earning income and preserving forex strategies. The golden rule of success is to reach a perfect balance. The investing strategies teach to find this balance through two various currency pairs that traditionally move in opposite directions. It is really great to observe when one pair is going down and leads to loses, the other increases.
What is more, we provide special data that supports our strategy. For example, if you were to look at the record of the previous years, you would see while comparing two currency pairs that it is almost the same as looking into the mirror. This is how this strategy works. The point is that your risks are minimal when you work with two pairs that more in absolutely opposite directions.
Those who are trading no doubt have to go to this forex managed account site – there one can find lots of related info on Forex investment.
This is important, don’t forget that we are living in the world where information makes life easier. Make use of the Internet and search for managed forex trading if you need this type of info.
If you are properly armed with the info in your topic you can rest assured that you will in any case find the way out from any bad situation. So, please make sure to track this blog on a regular basis or – an ideal solution for you – sign up to its RSS feed. Thus you will have your hand on the pulse of the latest informational updates here. Blogs can be helpful, you just need to know how to use blogging for the currency exchange market.

Taking Profits

So much time is spent on entering a trade. Today I want to focus on some exit strategies. This is not a full Fibonacci course, so if you don't understand the basics I suggest that you visit my website for help with those aspects.

Human nature makes trading very challenging. Sometimes you want to exit a trade too quickly when it goes against you, and to cling on to a winner too long. Too often a winning trade will reverse, taking back most of your profits, or even going into a loss. On the other hand if you exit too soon, you risk missing some big profits. You may find that you're sitting on the sidelines while the market continues well beyond your exit.

In this lesson I'll show you how to bank those profits before they turn against you.
First look at this FOREX chart (JPY hourly chart).

Let's imagine that you were clever (or lucky) enough to enter long near point "A". You're feeling pretty good when price reaches "B". So good that you don't want to exit, because the up-thrust just before "B" give the impression that this market wants to go further.
Before you know it, the market reverses and heads towards "C". Right at "C" you get scared and bail out with a little profit. Not much profit compared to exiting at point "D" or even at "F".
You exit near "C", and feel relieved until you see the market heading (thrusting) up to point "D". You stop kicking yourself long enough to enter when it breaks above "B", just a little before the high at "D".
Soon after your entry near "D", the market retraces to "E", and on the way breaks below the high of "B". Breaking below the high of "B" feels scary because you're thinking this chart could be back at "A" in a flash. So you exit at "E" licking your wounds with a loss in this trade.
You start to notice more frustration now, when you enter somewhere between "E" and "F". You're feeling good near "F", but then the chart dives to "G" and you're stunned! This is a losing day for your account, and it's beginning to hurt.
By this time you feel like the whole market is watching your trades, and they're doing exactly the opposite of what you are doing. You start thinking that they wait for you to enter before they slam you and empty your account..
You have wasted your emotional capital, you don't want to trade any more. You don't have the stomach to consider shorting the rally after "G" to take profits at "H".
There must be a better way!
Banking those profits.
You should seriously consider using profit targets to improve your trading performance. There are several ways to do this, my preference is to use Fibonacci techniques.
On the following chart, I have added a Fibonacci expansion using points "A, B, C". This provides us with three profit targets. They are at 116.52, 116.93, and 117.59, see the blue arrows.

If I add another Fibonacci expansion using points "C, D, E", then two more profit targets are added, at 116.87 and at 117.22 . I have not added those studies to the chart, in order to keep things simple for now. You will notice the 116.87 target is quite close to the profit target at 116.93 in the above paragraph. And the 117.22 target is remarkably close to the swing high at 117.32 which is between E and F. We'll ignore those for simplicity, just remember that Fibonacci is excellent at predicting probable turning points.
The trick with Fibonacci is that the market sometimes blows right through a profit target. So what do you do then? Simple - you stay in the trade! But sometimes the market reverses shortly after a profit target.
Sometimes the market respects a certain Fibonacci level, sometimes not. Some Fibonacci levels are "stronger" than others. Advanced Fibonacci techniques are able to help determine which have more validity, but that is beyond the scope of this lesson. What mechanism could you use to exit the trade?
One practical method of timing a trade is to use an oscillator. Another is to use a moving average. When an oscillator shows a decline of momentum, or when price crosses a moving average, you could exit the trade. Let's explore the "oscillator" option in the following chart.

In that chart, I have removed the Fibonacci studies (less clutter), leaving the blue arrows for profit targets. At the bottom I have added the default Stochastic per E*Signal charting software. I have added a red vertical line whenever the Stochastic "fast" blue line crosses the "slow" red line just after price rises above the Fibonacci target. If you exited when price reached those vertical red lines, you'd be a happy trader!
Already you can see the potential of using profit targets with an exit trigger.
You may want to research the following:

• Possibly exiting a partial position at each profit target.
• Consider entering long again on the dips, when the chart begins to rally again.
• Consider using multiple time-frames, perhaps Fibonacci studies on the hourly chart, and exit triggers on 5 minute charts.