To illustrate a typical FX trade, consider the following example:
The current bid/ask price for EUR/USD is 1.2310/13. You are confident that the Euro will appreciate against the US dollar. Hence, you long 100,000 EUR/USD at 1.2313.
The Euro strengthened as expected to 1.2380/83 and you decide to close the trade at the rate of 1.2380.
Hence, your Profit is computed as follows:
Profit = (Selling price – Buying price) x amount
= (1.2380 – 1.2313) x 100,000
= USD 670
In margin forex trading, currency pairs are traded where a trader actually borrows money to purchase another currency. The net effect of the interest that is paid on the borrowed currency and earned on the purchased currency is the rollover interest.
To collect positive rollovers, you will need to long the higher yielding currency and hold the position overnight. If you short the currency paying the higher interest rate, you will have a negative roll.
With DBSVefx, all overnight positions will be automatically rolled over. Such rollovers will be calculated automatically and reflected on the DBSVefx online trading statement for your convenience.
In order to calculate the rollover interest, we need the short-term interest rates on both currencies, the current exchange rate of the currency pair and the trade amount of the currency pair purchased.
Did you know rollovers are related to a trading approach called Carry Trades? Click here to learn more.