Rollovers are transactions in currency trading where an open position from one value date or settlement date is rolled over to the next value date or settlement date. Rollovers are unique to the currency markets. Rollovers represent the intersection of interest rate markets and forex markets.

Keep this in mind what you are trading is in fact the excellent ancient cash. Currency is money after all. So when you talk of money, interest rates naturally come into play. Rollover rates depend on the difference between the interest rates of the two currencies in the pair that you are trading.

When you are long on a currency, it is like having a deposit in a bank account. If you are small, its like take a loan from the bank. Just as you would expect to earn interest on a bank deposit and pay interest on a loan, you should expect an interest gain or an interest expense on holding a currency position over time.

Reckon of the open currency position as one currency with the positive balance (the currency you are long) and one with negative balance (the currency you are small). The difference between the interest rates between the two currencies is called the interest rate differential.

Because your accounts are in two different currencies, the interest rates of two different countries apply. You can find the interest rates of different countries from Wall Street Journal Online, Financial Times online or that matter any excellent financial website. You should look for the base or benchmark lending rates in each country.

If you hold an open position past the settlement date or value date, rollovers are usually carried out by your forex broker. The smaller the impact of the rollovers, the narrower the interest rate differential! The larger the impact from rollovers, the larger the interest rate differential!

Some online forex brokers apply the rollover rates by applying the rollover credit or debit directly to your margin balance. Other forex brokers apply the rollover rates by adjusting the average rate of your open position. Rollovers are applied to your open currency position by two offsetting trades that result in the same open position.

Rollovers are applied to open position after 5.00 PM EST change in value date. Rollovers are not applied if you dont carry a position over the change in the value date. For day traders, who usually close their positions at the end of each trading day, rollovers do not apply. Rollovers only apply to your over night open position carried over to the next day.

If you are small the currency with the higher interest rate and long the currency with the low interest rates, rollovers will cost you money. If you are long the currency with the higher interest rate and small the currency with the lower interest rate, rollover can earn you interest income.

Trading is not investing. Trading is speculating. Trading can be challenging. Speculating is defined as taking business risk in the hope of profiting from market fluctuations. Successful speculating requires predicting outcomes and analyzing different market situations. It also requires putting your money on the side of the trade on which you reckon the market is going to go up or down.

Trading can also be the appreciation of the fact that you can be incorrect 70 percent of the time and still be a successful trader if you apply the right techniques for analyzing trades, managing your money and protecting your account.

Over time, opportunity keeps on shifting from one market to another. For example, right now forex and gold markets are really hot while stocks are down. Gold prices are going up. Those who entered the trend by investing at the right time and are going to ride the trend till it lasts will make a lot of money in the gold markets. At the moment nearly everyone is running and buying gold as a hedge against turmoil in the global markets. Everyone includes countries, institutional investors, hedge funds and retail investors.

Many hedge funds had made a lot of money by investing in crude oil futures in the year 2008. Right now oil prices are down due to the reduced demand in the global markets, this situation may continue for some months or some years but suddenly you will find that crude oil futures have become a fantastic investment opportunity again.

Timing for entering the market and the timing for exiting the market is very vital for a successful trade. In trading it is the timing that is of essence. As the global economy recovers and demand for oil increases, oil prices will again go up in a few years time.

A lot of people make the mistake of focusing only on one market. Many people end up spending time on only one market. In reality all the markets are interlinked. Successful trading requires mastering a strategy that enables you to trade multiple markets and multiple time frames. If something happens in one market, you will find the repercussions in the other markets.

Many traders get stuck up with one market. They want to master that market. They trade only one instrument. They do testing and development. They place on a million indicators. Then they go and trade live that instrument. While they do everything they can while spending all kinds of time trying to figure out one market and one timeframe. But then what nearly happens is that the market starts to go sideways. The opportunity shifts to another market.

You really should have the ability to be able to adapt to different market conditions and not waste your time mastering one market. This is critical if you want to make a fortune in trading. You can start with one market but over the years add a few other markets as well. This will diversify your risk as well. For example, there were so many stocks just a few years ago that were incredible to trade that either dont exist anymore or would not trade successfully today. Stocks are no more a excellent investment. But if you want to trade stocks, you will have to wait for a few more years for the stock market to boom again.

This is counterintuitive. A lot of people will teach you that you really need to learn the ins and outs of one market. But the problem with that philosophy is that its very hard to stay with one market and one timeframe.

In forex trading, stop loss execution policy is somewhat different than in equity trading. If the broker bid price reaches your stop loss order rate, stop loss orders to sell are triggered. Suppose, your stop loss order to sell is 1.2540! The brokers lowest price quote is 1.2540/1.2543. Your stop loss order will be executed. Nearly the same goes for buy orders.

Most of the forex brokers will never guarantee stop losses around the release of economic reports. The benefit of this practice is that some brokers will guarantee against slippage on your stop loss order under normal trading conditions. The downside of this is that your stop loss order will be executed earlier. So you will have to add in extra cushion when placing them on your forex trading platform.

One-Cancels-the-Other Orders: A one cancels the other order (abbreviated as OCO order) is a stop loss order paired with a take profit order. An OCO order is the ultimate insurance policy for any open position! Your position stays open until one of the order levels is reached by the market and closes your position. When one order level is reached and triggered, the other order is automatically cancelled.

One cancels the other (OCO) orders are highly recommended for every open position. Lets use an example to make it clear. Suppose you are small USD/JPY at 120.00. You reckon that its going to keep going higher if it goes up beyond 120.00. Thats where you choose to place your stop loss buying order.

You place your take profit buying order at 118.50 as you believe that USD/JPY has downside potential to 118.50. As long as the market trades between 120.00 and 118.50, your position remains open. Your risk is clearly defined. You now have two orders bracketing the market. Suppose USD/JPY 118.50 price level is reached first, your take profit order is triggered and you buy back at a profit. But, suppose USD/JPY 120.00 price level is hit first, your position is stopped out at a loss.

Contingent Orders: A contingent order is an order where you combine several types of orders to make a complete currency trading strategy. Contingent orders are also referred to as if/then orders. If/then orders require the If order to be done first. Only then the second part of the order becomes active. So they are sometimes also called If done/then orders.

Your order is only filled based on the price spread of the trading platform. This is the key feature of most forex broker order policies. If the trading platform offer rate reaches your buy rate that means that your limit order is only executed. Similarly, a limit order is only executed if the trading platform bid price reaches your sell rate.

Suppose you have a buy order to sell GBP/USD at 1.2655. Your brokers spread on GBP/USD pair is 4 pips. If the trading platform price is 1.2655/1.2659, your buy order will be filled. If the lowest price is 1.2652/1.2656, the limit order will not be filled as the brokers lowest rate of 1.2655 does not match your buy rate of 1.2656. Nearly the same thing happens with limit orders to sell.