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Forex Trading Terms: Overnight Position

Currency trading on the FX marketOne of the forex trading terms you might come across is "overnight position." This is an interesting forex trading term, since the currency market is open 24 hours a day from 5 pm Eastern on Sunday until 5 pm Eastern on Friday.

The key to the overnight position is the 5 pm division, which is quite final. If you buy something at 4:59 pm on Tuesday, and then sell it at 5:01 pm that same Tuesday, it is considered an overnight position. Investopedia has an example of how an overnight position works in currency trading on the FX market:

The new trading day is considered to occur right after 5:00pm EST. At that point in time, the trader’s account either pays out or earns interest on each position depending on the two currencies’ underlying interest rates, which is called rollover. For example, a trader has bought Canadian dollars and is selling U.S. dollars. If the Canadian interest rate is at 3.00% and the U.S. interest rate is at 2.50%, the trader will then receive a payment that equals 0.50% into his account.

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This entry was posted on Friday, July 18th, 2008 at 13:54 and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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