|
Forex Market Behavior
Rollover in Forex
You may have heard of the rollover in forex trading, and you might not be familiar with what it is. It's actually a very simple concept. Rollover is a situation that occurs when you hold a trade beyond the ending time of a particular day's trading.
There are different times at which this may happen, and that will depend on which broker you are using for your forex trading. But at any time of day, the rollover is the time when your trade is carried to a new day and you pay, or are paid, for the position you hold on that trade.
When you take a position in the forex market, you are simultaneously buying one currency and selling another. No matter what currency it is, all currencies are paired in forex, so you must sell one to buy another. When you do this, you are, in effect, borrowing one currency from someone to sell it or buy it. The in-depth details of this borrowing are not of much concern to you as a trader, but what is of concern is the interest rate for the currencies involved.
Each currency bears an interest rate that is very similar to the rate established by that currency's central bank. The difference between the rates of the currencies in the pair you are trading is what determines whether you pay, or are paid, when the day changes in the currency market. In some instances, you will pay regardless of the direction you take on a currency pair, such as the GBP/USD pair where the rates are so close at this time that the spread between them leads to you paying whether you buy or sell.
As noted earlier, the times vary as to when you will see the rollover occur. In the case of many US forex brokers and market makers, the time used for the rollover is the end of banking hours on the east coast. Basically, when the banks close in New York, the rollover occurs, and the next day is started. At that time you will either be charged or credited, depending on your trade.
To avoid this, all you have to do is to close your positions before the rollover occurs. In the case of most brokers, you can exit the trade prior to the rollover and incur no charges or credits for that day. However, some brokers have moved to a continuous rate calculation and charge or credit based on how long you held the position, regardless of whether or not it carries through the rollover.
See Also:
Are These Simple Trading Mistakes Costing You Money In The Forex ...
The Basics of Forex Trading
The Fundamentals of Forex
Estimates suggest that the volume of daily currency trading amounts to 1.5 trillion United States dollars. Forex Trading is the trading of currencies. An investor, with even a small amount of cash, can buy devaluated currencies and sell them when the value increases.
If an investor is savvy and keeps abreast of world economic development, he can stand to make a huge profit in Forex Trading. With the volatility of the currency market and an investors ready access to the Internet, Forex Trading has become the most lucrative venue for investors in the global marketplace.
Forex Trading doesnt entail the complications associated with the buying and selling of stock. An investor decides when to buy or sell and then implements his decision by clicking into Forex Trading on the Internet 24 hours a day except for weekends.
You do not have to wait for the markets to open the next morning to buy or sell. The investor is in control of his investment in a way that he cannot be with stocks, and the investor doesnt have to have thousands of dollars to invest in Forex Trading.
In order to be successful in Forex Trading, basically, all an investor needs is a small amount of cash, access to the Internet and a keen sense of events that will cause currencies to move up or down. |
|
More articles:
How Start Trading FOREX | Forex & insurance
FX Trading Basics
UK Pound Drops on FX Market
Merv's Daily Commentary, 20 Feb 2008
Foreign Exchange Market Behavior Expectations and Chaos
The .382 Fibonacci Ratio
Intermediate Forex Trading
There are many different intervals in forex trading, including scalpers (very short term), day traders (short term), intermediate traders (days), and investors (week, months, even years). Intermediate trading is advantageous for several reasons, and this is why it is perhaps one of the more popular trading intervals used.
Intermediate trading allows you to look at the market and say "this is where I think prices will go over the next several days". This allows you the opportunity to enter a position that you can hold for long enough to get through all of the "market noise", price action that occurs but is not relevant to the trend you are pursuing.
You should be aware that in order to trade over the intermediate term, you must scale back your leverage a bit to avoid margin calls as the result of this noise.
Intermediate trading is based largely on technical analysis, to include the usage of indicators, trend lines, and support and resistance lines on charts. However, it is helpful to also include some fundamental analysis in your decision.
Rather than the fundamentals that would tell you where a currency will be next year, use fundamentals to help you gauge the current market sentiment on the currencies you are trading. This can help you to know whether there is a particular favorite in the market, or if sideways action will occur because of market indecision.
As with any trading time frame, you should always be looking at three intervals of charts. For intermediate trading, perhaps the best way to do this is with daily charts for the overall trend, two- three- or four-hour charts for your actual trading, and one-hour charts for details, especially on good entry and exit points.
What indicators you choose for each of these charts will be up to you. However, you should never operate off just one time frame because you will miss the bigger picture of where price is going, and you will miss the perfect entry and exit points provided by the smaller time frame.
No matter what, leave room for prices to move against you. Study the charts for indications of how prices swing to know how much room to leave yourself on the trade, and consider stop-loss orders to help you avoid further loss.
The one thing you should never do is put yourself in the position of a margin call.
Related Topics: Leverage in Forex,
Use Caution In Forex, Fibonacci Forex Trading
|