Forex's Spot Deals
Even if the United States dominates most markets, Forex "spot" dealing, is all the same, traded through places such as London, Great Britain. In this article we will use London time to describe Forex spot dealing and roll-overs.
Many deals in the Foreign Exchange Market are done as a Spot deal. The spot deal is almost always done as resolution for two businesses later in the trading day. On a specific date the counter parties, in theory, take the delivery of the currency that they have bought, or send what they've sold.
The Spot Forex targets the time of business day that ends at 21:59 (this is London time). In any position, it still opens at this time automatically, and rolls over to the next day for business, and then again finishes at exactly 21:59.
This is essential to ward off the current delivery of the currency. The traders never hope to actually take the delivery of the currency. The trader will give instructions to their broker to, most of the time, rollover their position.
Most brokers, at present, do this in an automatic way, and it will be included in their procedures and policies. The act of rolling over currency pair is also known as "tom.next" (this means "tomorrow", and "next day").
Again, the trader's broker will rollover automatically the trader's position, unless the trader instructs their broker that they want delivery of the currency. Another point is the leverage accounts are most often unable to actually make delivery of the currency, as there is inadequate capital to cover the trading transaction.
If the trader is trading on margin, the trader, in effect, has a loan with his broker for the amount they are trading. If the trader had 1 lot in the position, their broker has an advanced their $100,000, even if they did not actually have the $100,000. Their broker will regularly charge the trader with the interest differential of the two currencies if the trader rolls-over. This happens normally if the trader has rolled over their position and not if the trader closes.
In simpler terms, if the trader has long bought a specific currency, and the currency has increased in interest rate overnight, the trader will gain, with a roll-over, but, if the trader short-sold, they will not receive this advantage.
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