Brokers (spread, Commissions & Rollover/Swap Rates)

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Rollover & Swap Rates

Rollover is the amount of interest that you will either be credited or debited if you are still holding an open trade at the end of the trading day. Whether you are credited or debited will depend on the trade pair you are holding. You do not pay or receive any rollover interest unless you are holding an open position at the day’s end.

Rollover payment amounts are calculated by using the interest rates from the 2 currencies in the pair you are trading.

Each broker will have a different time for the day’s end so please check with your broker for the correct interest rates and also end of day time. You can find more information on rollover and swap rates from this informational article on IC Markets website HERE. You can also find up to date rollover rates inside your MT4 terminal.

 

How Brokers Make Money

Brokers make money one of two ways. The first way is by adding spreads and commissions onto a traders trade to make a profit. The other way a broker makes profit is to make a market and profit from a trader losing. In other words; the broker takes the other side of a traders position and profits from their loss.

How brokers make money from spreads and commissions has already been covered and these brokers are called Straight Through Processing (STP) brokers because all they do is get the trade from a retail trader and process it through to their group of banks and liquidity providers. The group of banks sends back a price, the broker adds a spread on top of the price and the broker profits from the spread they charge to traders.

The market maker does not operate this way. They take the retail traders trade that they have ordered, they will normally have a book of orders that they are trying to match because they are making a market and they are actively trading the other side. The market maker can see the retail traders stops when they come through. They can see their targets and it is in the market makers best interests for those targets not to be hit and for the stops to always be hit because the market maker directly gains. There is a clear conflict of interest.

It is up to each individual trader which broker they go with, but there are some important factors that brokers should meet and these are discussed in a trading lesson here; Recommended Forex Broker & Charts for Traders which goes through exactly what brokers should provide.

 

Charts

Traders at all levels use charts to analyse the market direction and decide whether or not to place a trade, some of the common types of charts that are used are:-

  1. Line charts
  2. Bar charts
  3. Candle stick charts

Line Chart 

Bar Chart

Candlestick Chart

 

All three charts are the same time frame and the same pair, as you can see the price action picture gets clearer as you move down to the candlestick charts, they show us the best information as to what price is doing even to an untrained eye. Each candle stick shows the open price the closing price and where price travelled to during the given timeframe. The rectangular candle body shows the open and closing price (white = up move, black = down move), the tails are where price travelled too, but then retreated in the given time frame.

 

Correct Time Charts

The unofficial Forex daily close is 5pm New York time. With this in mind it is very important that you use the charts that reflect these timings. The best and most accurate charts to use are New York close 5 Day charts. This means that there are 5 candles per week and the daily candle closes at the end of the New York session.

Having your charting setup this way means you will get a true indication of the market with the candle opening with the Asian session and closing with the US session close.

I highly advise using the industry standard MT4. A link to the correct free New York close demo charts can be found New York Close 5 day MT4 Charts That tutorial also contains information on how you can make your MT4 make any timefame you wish.

 

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Introduction to Forex – Course Outline

What is Forex?

How Forex is Traded

Trading Sessions and Best Times to Trade

Leverage, Margin, Pips and Lots

Brokers (spread, commissions & rollover)

Types of Forex Analysis

Price Action Trading – Johnathon Fox’s Trading Strategy Introduction

Making Forex Trading Plan

Common Forex Trading Traps to Avoid

The Correct New York Close MT4 5 Day Charts For Traders to Trade With

Johnathon Fox’s Professional Trading School

Brokers (spread, Commissions & Rollover/Swap Rates) was last modified: October 19th, 2014 by Johnathon Fox
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About Johnathon Fox

Johnathon Fox is a professional Forex and Futures trader who also acts as a mentor and coach to thousands of aspiring traders from countries right around the world. Johnathon specialises in helping traders reach their full trading potential by helping them master the art of price action trading and correct money management techniques. To learn more about how you can become a student of Johnathon’s and learn the strategies he uses, then check out the Forex School Online Lifetime Membership