Overnighting in currency trading

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  • Benutzernamejoeysteele
  • Status Member
  • Registriert seit1/24/17
  • Beiträge6

I’m new to forex trading and am still looking for the right broker. From what I gather, many brokers charge a fee when you hold currency overnight – as in, you do not sell your currency the same day you buy it. Does anyone have experience with this? Are the fees similar to custody fees for securities accounts, or are they much higher? Which Swiss broker has the lowest (or no) overnight fees? Any help would be much appreciated.

 
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  • BenutzernameMoneyguru von moneyland.ch
  • OrtSchweiz
  • Status Expert
  • Registriert seit8/4/15
  • Beiträge4079

Hi Joey,

Forex brokers do not usually charge you a fee when you hold positions overnight or over the weekend. What you do need to pay attention to is interest when you extend the settlement date.

Forex generally has a settlement period of 2 days, which means that when you buy currency, that currency needs to be delivered to you within 2 days. In order to keep currency positions open for trading purposes, most forex brokers automatically close and reopen any positions which you have not closed by 5:00PM. This begins a new settlement period, allowing you to keep the currency in the market indefinitely.

In the same way that you earn interest on assets held in the bank or pay interest on debts you owe to the bank, you earn or pay interest on currency held by a broker every time your positions are closed and reopened to extend the settlement. This interest is referred to as "rollover", and it is generally calculated on a per-day basis.

Interest rates on currencies fluctuate. When the interest rate on the currency you buy is higher than the interest rate on the currency which you sell, you earn interest on your currency assets. This interest is known as "positive roll". If the interest rate on the currency you buy is lower than the interest rate on the currency which you sell, you pay interest. This interest is known as "negative roll".

Negative roll can present a significant expense, so it is important that you understand the current interest rates of currencies which you are trading before you hold them overnight.

A good overview of costs associated with currency trading is available here:

/en/forex-trading-cost-traps

Best regards,

Moneyguru

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Cheap bank accounts with card

Free bank account

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  • CHF 20 trading credit with code «YUHMONEYLAND»

Swiss digital bank

Radicant

  • High interest on your everyday account

  • Best exchange rates

  • Up to 1% of card spending as saveback in the investment portfolio

Swiss Bank

Bank WIR Bankpaket Top

  • Free account & card

  • No exchange fees for foreign payments (interbank exchange rates)

  • 24 ATM withdrawals worldwide per year free of charge

Swiss digital bank

Alpian

  • CHF 100 welcome bonus

  • Favorable foreign exchange rates

  • Multi-currency account with Visa card (CHF, EUR, USD, GBP) 

Online private account

UBS key4

  • 50 KeyClub points as a welcome gift

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