Hi David,

Is roll over like a free lunch?

If I go long on a currency with high interest rate just prior to 5pm EST and then close the trade immediately after 5pm EST, to avoid any major adverse moves in the market, would I not be able to make some (relatively) risk free profit, given the leverage that's available in the forex market, especially, if I do so in a currency pair that has a low spread e.g. EURO/USD etc.

Am I missing something here in the bigger picture?

Please advise

thank you for your time David

Hi pjethwani,

Good to hear from you.

I think you will find in trading that, with the very rare exception, there are no free lunches. There are sometimes things that look like free lunches but upon closer analysis they are normally actually more like the cheese on the mousetrap;-)

So the short answer to your question is no I think you will find it very difficult to make money in the manner that you discribe below for two reasons:

1. You do not normally make enough from the rollover to make up the spread in the currency pair that you are trading.

2. The market is on to this trick so if the market makers see people loading up to try and take advantage of rollover they are going to push the market against the trade which will make it unprofitable.

Hope that helps. Let me know if there are any other questions

Best Regards,
Dave

Hi David,

thanks again

on a different note,

Who are these market makers?

How do they differ from regular traders (individual or institutional)?

How do they have the ability to move the market in their direction and profit from it?

sincerely appreciate your help

Hi Pjethwani,

My pleasure.

Market makers are the banks and other firms that make prices in the forex market that you and other traders place trades on. The differ from regular traders because regular traders are what are referred to as "price takers" meaning that they normally only buy or sell on the price that is given to them. Market makers are what are reffered to as "price makers" meaning that they consistantly put prices out into the market to be traded on.

For more info on this see this wikipedia link and watch the videos under module 1 of our Free Forex Trading Course.

Hope that helps.

Best Regards,
Dave