A:

Overnight positions represent all open long and short positions that a forex trader possesses as of 5:00pm EST, which is consider the end of the forex trading day.

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.

The 5:00pm EST deadline is a very strict division. If a trader entered into a position on Monday at 4:59pm EST and closes it on the same Monday at 5:03pm EST, this will still be considered to be held overnight because it was held past 5:00pm EST and then is subject to rollover. Likewise, a position opened on Monday at 5:01 pm EST will not be considered an overnight position unless it remains open past the following Tuesday at 5:00pm EST.

RELATED FAQS
  1. In the forex market, how is the closing price of a currency pair determined?

    The foreign exchange market, or forex, is the market in which the currencies of the world are traded by governments, banks, ... Read Answer >>
  2. What does rollover mean in the context of the forex market?

    In the forex (FX) market, rollover is the process of extending the settlement date of an open position. In most currency ... Read Answer >>
  3. How does the foreign-exchange market trade 24 hours a day?

    The forex market is the largest financial market in the world, trading around $1.5 trillion each day. Trading in the forex ... Read Answer >>
  4. How do I close a long position in forex?

    Learn the different ways that traders close out existing long positions in the forex market, depending on whether their brokers ... Read Answer >>
  5. Is there a buy-and-hold strategy in forex, or is the only way to make money by trading?

    Typically there are different ways to trade in most markets. Traders have been classified into three groups, primarily based ... Read Answer >>
  6. What am I buying and selling in the forex market?

    The forex market is the largest market in the world. According to the Triennial Central Bank Survey conducted by the Bank ... Read Answer >>
Related Articles
  1. Trading

    Understanding Forex Rollover Credits And Debits

    Forex trades are subject to receiving interest or being debited interest if positions are held overnight.
  2. Markets

    The Handy Guide To Global Stock Market Holidays

    Exchanges close on holidays--which vary by country. If you're a global trader, it's useful to have this handy Investopedia bank holiday reference.
  3. Trading

    Strategies For Part-Time Forex Traders

    We present some ways that you can still profit in forex, even with an inconsistent trading schedule.
  4. Trading

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  5. Trading

    Should You Trade Forex Or Stocks?

    Deciding which markets to trade can be complicated, and many factors need to be considered in order to make the best choice.
  6. Financial Advisor

    A Day In The Life Of A Day Trader

    Day trading has many advantages and, while we often hear about these perks, it's important to realize that day trading is hard work.
  7. Investing

    Activities You Can Take Advantage Of In The Pre-Market And After-Hours Trading Sessions

    A great deal can happen in between the New York close of the market and the open the following morning. Learn how you can access opportunities and hedge against risk outside regular trading hours.
  8. Trading

    How To Use The Forex Pure Fade Trade

    This intraday strategy picks tops and bottoms based on a clear recovery following an extreme move.
  9. Trading

    Tiger Trading: Long-Term Charts For Short-Term Currency Trades

    Stock traders can add currencies to their portfolios by using this patient investing strategy.
  10. Investing

    The Market In 5 Minutes: We're Gathered Here To Get Through This Thing Called Life

    Below is a tool used by the Benzinga News Desk each trading day -- it's a look at everything happening in the market, in five minutes. Apply for daily AM access by clicking here or email minutes@benzinga.com. ...
RELATED TERMS
  1. Overnight Position

    Trading positions not closed by the end of the trading day and ...
  2. Rollover Credit

    Interest paid to a forex trader who holds a position overnight. ...
  3. Pre-Market

    A period of trading activity that occurs before the regular market ...
  4. Rollover Rate (Forex)

    The net interest return on a currency position held by a trader. ...
  5. Open

    1. An unexecuted order that is still valid. An open order is ...
  6. Rollover

    A rollover is when you do the following: 1. Reinvest funds from ...
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center