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.