Overnight Positions and Usefullness

[MajorD]

Hello All,

I am new to this business and just started (1 month ago) researching this industry. Its amazing the wide scope of knowledge required ot master this profession. I am unclear on many topics but for the time's sake I am looking for an answer on this question.

In Forex trading, I understand each day you are take a small amount of your money and borrow a much larger amount from your broker to make money on small gains thus leveraging. By a certain time each day depending on your broker, you must close your position or risk paying some type of interest on the borrowed money. What I need to know is how long can you borrow this money? For example, Could I open a position on Monday morning and ride it until Friday morning where i will either make or loss money? Does anyone use this type of trading, guess a more long term trade than trading many times a day.

Sorry if you guys have heard this before, but I've search HI and Lo on this board looking for a similar question/answer.

Thanks in Advance!!!

 

[TRADERguy]

Hello All,

I am new to this business and just started (1 month ago) researching this industry. Its amazing the wide scope of knowledge required ot master this profession. I am unclear on many topics but for the time's sake I am looking for an answer on this question.

In Forex trading, I understand each day you are take a small amount of your money and borrow a much larger amount from your broker to make money on small gains thus leveraging. By a certain time each day depending on your broker, you must close your position or risk paying some type of interest on the borrowed money. What I need to know is how long can you borrow this money? For example, Could I open a position on Monday morning and ride it until Friday morning where i will either make or loss money? Does anyone use this type of trading, guess a more long term trade than trading many times a day.

Sorry if you guys have heard this before, but I've search HI and Lo on this board looking for a similar question/answer.

Thanks in Advance!!!

You can hold a position for as long as you want. You will pay interest if you sell the currency with the higher interest rate and you will receive interest if you buy the currency with the higher interest rate. The amount is more (triple I think) if you hold it through the close on Wednesday to cover the weekend days (because spot is 2 day deliverable).

Cheers,

TRADERguy

 

[MajorD]

So realistically, the turn around time is 2 days but you do have the option to kept it longer. I am assuming if you feel the trend is upward on Monday, you could purchase a lot on and ride it through until Tuesday evening or longer if desired.

Is this practice workable? Most people here trade intra-day and I dont see much discussion on holding trades longer than one day. I would think the profit potential is more obtainable over a few days than working it during the day.

 

[TRADERguy]

So realistically, the turn around time is 2 days but you do have the option to kept it longer. I am assuming if you feel the trend is upward on Monday, you could purchase a lot on and ride it through until Tuesday evening or longer if desired.

Is this practice workable? Most people here trade intra-day and I dont see much discussion on holding trades longer than one day. I would think the profit potential is more obtainable over a few days than working it during the day.

You will pay or receive interest starting the first day if you hold it through the close which is usually 5pm New York time (although some retail outfits use a different time).


Trading longer term is a common practice, especially with bigger players. There is enough liquidity in the market for retail forex, spreadbet, and small interbank traders to get in and out of the market whenever they want. But when you are talking many billions it's easier to trade longer term. By trading longer term you can also take advantage of trends based on fundamental economic shifts like the negative balance of payments in the US causing the USD to weaken. Just take a look at a weekly chart of the EUR/USD from 2001 to now and you can see how profitable longer term trading can be.




Cheers,

TRADERguy

 

[MajorD]

Thanks GammaJammer for the insight. When looking at the various types of trading strategies, I think the more long term plan as in a few days or a week max would be easier on the stomach and have a greater profit potential. Of course, it may swing the other way but a stop loss could help ease the bleeding. I am just paper trading as other say and have not gotten my feet wet in actual real money trading. But, when reviewing trends and charts, I find it easy to spot trends over days instead of during the day. I am trying to calculate the amount of interest charged from each overnight position and then work that into a plan.

 

[Roberto]

I think the more long term plan as in a few days or a week max would be easier on the stomach ... a stop loss could help ease the bleeding.

It's getting a bit medical ...

It depends how you look at it. Are the stomach-ache and haemorrhage better or worse than the perpetual insomnia some of us would have to face if we had a position open overnight?

 

[MajorD]

I can understand the insomia if your over leveraged and risking to much. When I figure out a plan, I''ll be sure to let you know.