By now, my friend, you already know that there are spreads to pay for entering a trade and there are rollovers to pay (sometimes to earn, thanks God… oh, well…) for holding a trade.
What you probably never thought of, or never experienced due to the lack of experience, hm, is that this Rollover thing is way much more nastier and costly than you can imagine. Where and How?
The truth is, the system of currency trading is built such way that we, retail traders, are slaves of constant fees as long as we trade: we pay the spread to enter a trade, and then if we hold it for a day, we pay a rollover on top (more of less we can treat it as another spread), and later the next day if we hold on to a trade, we pay another rollover (”spread”) and so on. The grim reality of all this costly trading is that long term investors (usually the smartest guys with a long term outlook at the currency trends) are actually put in the most disadvantageous position, where their fat brokers keep on charging them rollovers day after day as the trades kept open.
Want an example? Let’s laugh (or cry) together about my trades: I have a trade running for over 1.5 months now on AUDUSD. The trade sits in profit since opening, but it is a long term goal, and it’s not yet the time to close it. Everyday I pay a rollover on it (I mean, come on, I’ve paid the spread already, but it’s another everyday “spread” I’m paying to my broker… what a rip off! Really…) Yeah, let me boast about my profits so far: it’s $1960 in floating income and already -$532 in rollover charges, which leaves we about $1350 to cheer about.
Well, another trade is a bit better, check it out for yourself:
… And this will be with everyone who dares to hold a long term trade with a negative swap/rollover. Forex brokers are simply feeding on us everywhere they can! On the other hand, that’s the rules we accepted from brokers, right? So it is silly to whine now. I should repeat, that’s the rules we accepted! I accepted it as well :(
Can you make a conclusion from this, I hope you can. If you ever to hold a long term trade, consider opening only those where you’ll get a positive swap - it is better that way, trust me ;) Or, there is another way around - seek for a broker with no-swap accounts. The number of such brokers is growing, basically due to increasing popularity of trading in the Muslim world, where the Sharia laws prohibit swaps (extra rewards). So, Forex brokers now have this new no-swap technology working, and you can join in regardless your religion (depends on a broker, of course).
Well, that’s the lesson for today. Hope you’ve took something out for yourself. Stay tuned!