What is rollover? What is the swap? To fully understand what it is, you have to start by explaining what happens in practice when we trade forex?
When we trade forex online, for example, eurodollar (ear / USD) and, for example, open a buy position, we are merely buying euros and selling dollars.
Each coin has an interest rate applied to its owner, decided by the central bank. For example, for the euro at the moment, the official rate is 0.75% per annum, while for the dollar, it is 0.25% per annum. By buying a currency, you are entitled to receive this interest rate, because at that moment you have it, selling it, on the contrary, we will have to pay this rate. Buying euros and selling dollars, the broker will credit us or charge the difference between the two interest rates. This usually occurs at the end of each trading session, which generally corresponds to 11.00 pm Italian time, i.e., 5 pm local time in New York. The difference between 0.75 and 0.25 is 0.5. Therefore, a credit will be credited at the end of the session interest of 0.5% on an annual basis for the amount we are on the market at the time. On the contrary, if we are selling euros and buying dollars, we will be charged for this.
This debit/credit is called a rollover or swap, which is synonymous with the same phenomenon that occurs when operating in the forex currency markets.
What Can My Broker Do with This Information?
First, the broker and forex traders (เทรดเดอร์ forex which is the term in Thai) does not take the capital to open positions directly by the central banks, but intermediaries who call liquidity providers and liquidity providers. These entities may apply interest rates other than those of central banks; therefore, the rollover or spread may be different. Also, the broker holds a part of the rollover per se. Accordingly, if the rollover is negative, we will be charged a little higher if it is positive, a bit decreased, and the difference will be in the broker’s pocket. It is in addition to the spread of one of the ways the broker has to make money.
