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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.

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