Rollover rate is the interest charged or earned when you hold a forex position overnight, expressed in pips. It is the difference between the interest rates of the two currencies in the pair, set by their respective central banks.
How rollover rate is expressed
Unlike other trading costs such as spread or commission, rollover rates are quoted in pips rather than as a percentage. This makes it easier for traders to see the exact daily cost or credit. For example, a positive rollover of 2 pips means you receive 2 pips in credit when holding the position overnight.
Positive vs. negative rollover rate
If you hold a long position on a currency pair where the base currency has a higher interest rate than the quote currency, you earn a positive rollover rate—a daily credit. If the base currency has a lower interest rate, you pay a negative rollover rate. Short positions reverse this: you pay on positive-rate pairs and earn on negative-rate pairs.
Rollover rate variations
Because central banks set interest rates and can change policy, rollover rates fluctuate. The exact rate also depends on your broker's calculations, which can vary. Positions held over the weekend incur higher costs than typical trading days. For traders holding positions overnight or longer, understanding rollover rates is essential to calculating true trading costs.
