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.

  1. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
  2. How do I Implement a Forex Strategy when spotting a Sanku (Three Gaps) Pattern?

    A forex trading strategy can easily be implemented to profit from a market reversal signal that comes from the sanku, or ... Read Full Answer >>
  3. What's a good forex strategy to use when spotting a Wedge-shaped Pattern?

    Use wedge-shaped patterns to identify bullish or bearish price action when trading currencies in the foreign exchange (forex) ... Read Full Answer >>
  4. How do I use Time Segmented Volume (TSV) for creating a forex trading strategy?

    You could use time segmented volume (TSV) to build a forex trading strategy, which allows you to compare volume data to determine ... Read Full Answer >>
  5. How do I close a long position in forex?

    Closing a long position in forex trading depends on whether you are using a broker operating under U.S. trading regulations. In ... Read Full Answer >>
  6. Where did the term 'pip' in currency exchange come from?

    The term pip is an acronym for percentage in point or price interest point. It measures a unit of change within a pair of ... Read Full Answer >>
Related Articles
  1. Forex Education

    Explaining Uncovered Interest Rate Parity

    Uncovered interest rate parity is when the difference in interest rates between two nations is equal to the expected change in exchange rates.
  2. Forex Education

    Top 6 Most Tradable Currency Pairs

    The most frequently traded currency pair is the euro/U.S. dollar. The euro is the base currency in the pairing, while the dollar is the quote currency.
  3. Forex Fundamentals

    How to Buy Chinese Yuan

    Discover the different options that are available to investors who want to obtain exposure to the Chinese yuan, including ETFs and ETNs.
  4. Forex Education

    9 Tricks Of The Successful Forex Trader

    These steps will make you a more disciplined, smarter and, ultimately, wealthier trader.
  5. Forex Strategies

    3 Simple Strategies For Euro Traders

    Euro traders can execute three simple but effective strategies that take advantage of repeating price action.
  6. Forex Education

    4 Of The Most Popular Traded Currencies

    Every day, trillions of dollars trade in the forex market. Here are a few of the most popular currencies, and some characteristics for each.
  7. Economics

    Currency Swap Basics

    A currency swap involves two parties exchanging a notional principal and interest to gain exposure to a desired currency.
  8. Forex Fundamentals

    3 Ways To Forecast Currency Changes

    Forecasting exchange rates can help minimize risks and maximize returns. Here are three popular methods for forecasting exchange rates.
  9. Investing Basics

    Quit Your Job To Trade Stocks

    Changes in technology have turned trading into a career field that’s easy to enter. But staying in it is a different story.
  10. Investing Basics

    Should You Trade Forex Or Stocks?

    Deciding whether to trade stocks, foreign exchange or futures contracts typically comes down to risk tolerance, account size and convenience.
  1. Currency

    Currency is a generally accepted form of money, including coins ...
  2. Transfer Risk

    The risk that a local currency cannot be converted into the currency ...
  3. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...

    See LIBOR
  5. WM/Reuters Benchmark Rates

    Spot and forward foreign exchange rates that are used as standard ...
  6. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center