Fore Rollover:
  • Forex Rollover:Rollover is interest that is either debited or credited at 5pm EST to a traders account. The amount depends on the yield from the Central bank. As it stands the Central bank Base rates are:-
  1. Reserve Bank Of Australia  - 4.5%
  2. reserve bank Of New Zealand - 2.5%
  3. European Central bank - 1.25%
  4. Bank Of Canada - 1.0%
  5. Bank Of England - 0.5%
  6. Federal Reserve - 0.25%
  7. Bank Of Japan - 0.1%
  8. Swiss national Bank - 0.0%
  • The Rollover that is credited or debited is worked out by the spread of the two currencies that you trade with. For example Is you were to LONG AUD/USD you would get +4.5% from Longing AUD but you would -0.25% from shorting USD, therefore you gain +4.25% from Longing AUD/USD.
  • To put this in perspective If you were to LONG AUD/USD at 1.0000 with 100,000 units (1 standard Lot) You would receive 4.25% interest Per annum or $4250, therefore you would be credited $11.64 every day at 5pm just for having the position open.
  • Next you would most likely traded with leverage. Lets say 25:1 meaning you put down $4,000 margin to trade with $100,000. Now that $4,250 is over 100% profit per annum just for having a position open. If AUD/USD stayed at 1.0000 for the whole year you would still get that $4,250. Now if you where to combine that with A winning trade the profit can really add up.
  • Alternatively If were to Short AUD/USD you would be debited that 4.25% and would lose money every day for having the position open.
Risk Sentiment:
  • Now that we have discovered that AUD and NZD are "high yielding" this shows that they are are relatively speaking higher risk to other currencies like USD and JPY. So in times when people have good confidence in the markets and economic outlook traders will search for high yielding pairs to get as much profit as possible and as such AUD and NZD would rally significantly against there counterparts.
  • Therefore when we have economic shocks like that in europe at the moment or in 2008, we see people buy safer lower yielding currencies like USD and JPY while selling their AUD and NZD's as you can see in this chart.
  • In 2008 AUD/USD sold of very hard to the tune of about 3800 pips.
  • but more recently In August with the global stock market sell-off AUD fell 1600 pips of global fears on Europe.
  • So now we see that AUD and NZD are fully dependent on their Central bank rates and the global risk sentiment. So because of this You can learn to trade important fundamental releases such as NFP report or GDP releases. 
  • NFP report comes out on the first friday of every month.The NFP number is meant to represent the number of jobs added or lost in the economy over the last month, not including jobs relating to the farming industry. This is compiled in the US so you would expect a good number to be USD positive but in fact its quite the opposite as AUD, NZD and EUR to some extent will rally hard on good NFP numbers as it is a sign of good global outlook. But of course a bad number would mean that they drastically sell off, sometimes up to 200 pips.
We can conclude from this article that in times of good economic outlook it is good to BUY "risk Currencies" like AUD not only because they are likely to rise due to the fact that traders are looking for high returns but also as you get a lot of Rollover credited to your account over the time you hold it.

If anyone has any questions about trading Risk or how to profit from Rollover please feel free to ask me!
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