How to trade overnight positions with XM

Overnight positions are trades that have not been liquidated or closed at the end of the trading day. This position is very common among swing traders who aim to trade continuously for several days.

If your strategy requires you to hold positions for more than one day, here's an explanation of how to trade positions overnight at XM.

The essentials of keeping positions open at night
As the name suggests, overnight positions refer to trades that start during the day and that you have not closed by the end of the trading day. Many day traders and scalpers do their best not to have these overnight positions because they have no control over what happens if they aren't there. For stocks, an overnight position means that you buy or short sell a company and continue to hold it after the market closes. Trading positions that traders leave open overnight can trigger rollover interest rates.

What is a rollover rate?
Rollover is the process of extending the delivery date (i.e. the date on which the trade must be completed) of an open position. The forex market provides two trading days for all spot trades, which means physical delivery of the currency. However, there is no physical delivery when trading with profit margins, so all open positions must be closed at the end of the day (22:00 GMT on XM's trading platforms) each day and reopened on next trading day. The cost of such a transaction is called the rollover rate.

The rollover rate is determined by swap contracts, which can be either charged or profitable to traders. XM doesn't close or reopen positions, but only debits or credits trading accounts for positions held overnight, based on the prevailing interest rate.

Although there is no rollover, if the market is closed on Saturday and Sunday, the bank continues to charge interest on positions opened over the weekend, but only lowered. To account for this time difference, XM introduced a three-day rollover fee on Wednesdays.

How to Calculate Rollover Rates at XM
There are some differences in the calculation of the rollover rates charged by XM. This price difference depends on the position of the trading instrument left open.

Forex and spot metals rates (gold and silver)

Rollover rates charged for forex and spot metals positions are subject to the next day's rate (i.e. tomorrow and the following day), including XM's mark-up for maintaining positions at night. The XM brokerage does not provide terms for overnight and day-ahead rates, but these are derived from the difference between the interest rates of the two currencies.

For example, if you are trading EUR/CHF, the rollover rate at tomorrow's and day-ahead's rates will be +0.5% for long positions, and -1.5% for short positions. In this example, we can know that the Euro's interest rate is higher than that of Switzerland. You receive +0.5% - the XM markup when a long position in the currency pair is opened overnight. In contrast, short positions are calculated to achieve a profit margin of minus 1.5% - XM.

The calculation of rollover rates for forex and spot metals is as follows:

X trade size (tom-next long/short rate - XM margin)

Remember that positive or negative positions depend on the difference between the exchange rate of two currencies in a given pair.

Stock and index rates
Rollover rates charged for positions in stocks and stock indices are determined by the underlying interbank rate of the stock or index (for securities listed in Australia, this will be the interest rate of short-term loans between Australian banks), plus/minus XM's margin depending on positions.

For example: Suppose you are trading Tesco shares listed in the UK. The UK short-term interbank interest rate is 1.5% per annum. The calculation for long positions is -1.5%/365 - XM - the daily markup of XM. On the other hand, for short positions, the calculation is 1.5%/365 - daily margin of XM.

The XM broker's rollover rate calculation for stocks and stock indices is as follows:

Trade size x closing rate x (long/short position of short-term interbank interest rate - XM margin).