How to Calculate Financing Rates on Forex Trades

When a forex position is carried from one day to the next, the position is adjusted to reflect the interest rate differential between the currencies. Learn how forex rolling works.


As a forex trader, it's important to understand the implication of holding an "open" position. An open forex position is one that's held through the close of trading from one trading day to the next. At the end of each business day, depending on the currency pair and the interest rate differential, a trader is likely to see credits and debits related to the position.
These credits and debits are related to the forex financing rate, which is the rate paid or received by forex traders to hold a forex position from one trading day to the next.

What is a forex financing rate?

A financing rate (also known as a "rollover rate" or "roll rate") is the interest paid or earned for holding a forex position through the close of trading from one trading day to the next. The financing rate isn't based on central bank rates. Instead, financing rates are interbank rates, which are the rates banks use when lending money between themselves.
Every trade with a currency pair consists of two parts: A trader is essentially "long" one currency in the pair and "short" the other. Each currency in a pair has its own interbank interest rate. A forex trader earns interest on the currency they're long, while simultaneously paying interest on the currency they're short. The differential between the two interest rates amounts to the net financing rate.
If the long currency has a higher interest rate than the short currency, the net financing rate yields a credit ("positive roll"). The opposite scenario yields a debit ("negative roll").
Financing rate credits and debits add up, so traders should understand how the net financing rate will potentially impact a position over an extended time period. 
Additionally, financing rates aren't fixed. They change as interest rates change, so traders should be aware of these fluctuations and how they can affect the overall profitability of a position.