What is an Overnight Position in Forex Trading

What is an Overnight Position in Forex Trading





What is an Overnight Position in Forex Trading

What is an Overnight Position in Forex Trading?

An overnight position can be a long or short position that a trader has that is still open in his portfolio by 5:00pm EST. 5:00pm EST is considered by many the end of the Forex trading day. The new trading day starts at 5:00pm EST which at this point in time, the trader’s account either pays out or earns interest on each open position depending on the Forex pair’s underlying interest rates. Each Forex pair will have different interest rates and these interest rates are sometimes also known as rollover. Let’s take an example using USD/CAD. A trader bought Canadian dollars and is Selling US Dollars. If the CAD interest rate is at 5% and the USD interest rate is at 3%, then the trader should receive a payment of 2% into his account at 5:00pm EST.

If a trader entered into a new position late and even if it’s at 4:59pm EST and closes the trade within a few minutes at 5:05pm EST, then this is considered an overnight position because 5:00pm EST is the start of a new day and this is subject to rollover rules. If a new position is opened on Tuesday at 5:01pm EST and is closed at 4:59pm EST Wednesday, this is not considered an overnight position unless it’s passed 5:00pm. 5:00pm is the divisive line that you have to be aware. Depending on your position and goals, sometimes it’s just best to trade on a new day which is after 5:00pm.

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“What is an Overnight Position in Forex Trading?”

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