Integrating forex rollover into your trading strategy can increase the profitability of your trades. While the amount of daily rollover you earn seems small, keep in mind that it can add up over time. And the more lots you trade, the larger the rollover you can earn. One thing to keep in mind if you want to earn money from this strategy is proper timing. For example, the end of the trading day is 5:00 PM EST in New York. If your position is still open at that time, your account will automatically be credited the rollover. In fact, you can open a position at 4:59 PM and see it credited to your account at five.
One strategy that you can use to make money from forex rollover is the carry trade. This strategy is based on the idea that you earn rollover when you buy a currency pair where the primary currency has a higher interest rate than the secondary one. For example, if you buy the AUD/JPY currency pair and the interest rate of the Australian dollar is 1.5% and that of the Japanese yen is 0.5%, you will earn 1% rollover.
To implement the carry trade strategy using forex rollover, let’s say you buy one lot of AUD/JPY and hold it for one year. For a typical lot of 100,000, this means you’ve earned $1,000 without having to do any actual trading. In addition, you should choose a currency pair where the currency with the higher rate is likely to appreciate in value against the one with the lower rate. This means that you can profit not only from the rollover but also from the appreciation in exchange rates. Another benefit of using the carry trade strategy is that the interest rate differentials serve as a protective buffer against adverse exchange rate movements. To provide additional protection, cautious traders can set stop loss orders at strategic points.
One secret of making money using forex rollover is to open positions on Wednesday, since rollover rates are tripled on that day. The reason for this is that trades opened during this day (which is considered a Thursday) will not be settled until Saturday. However, since the banks are closed on weekends, the trade will be settled on Monday; hence three days of rollover have accumulated.
A forex rollover strategy you can try using this anomaly is to trade AUD/JPY. This strategy is based on the odd fact that on Wednesdays, the price of this currency pair goes down. To set up, open hourly charts of this currency pair. One to two hours before the rollover will be applied (around 15:00), open a short position. When a new bar on the chart opens at around 16:00, close your position and take your profit. Like all strategies, it results in an occasional loss, but over the long term you should see a consistent profit. However, you should also keep in mind that no strategy is infallible and you should accept the risk of losing if you choose this strategy.