Most deals in Forex are done as Spot
deals. Spot deals are nearly always due for settlement two
business days day later. This is referred to as the "Value
date or delivery date. On that date the counterparties take
delivery of the currency they have sold or bought. In Spot
FX the majority of the time the end of the business day is
21:59 (London time). Any position still open at this time
are automatically rolled over to the next business day, which
again finishes at 21:59. This is necessary to avoid the actual
delivery of the currency. As Spot Forex is predominantly speculative
most of the time the traders never wish to actually take delivery
of the actual currency. They will instruct the brokerage to
always rollover their position. Many of the brokers do this
automatically unless you instruct him that you actually want
delivery of the currency. Another point noting is that most
leveraged accounts are unable to actual deliver of the currency
as there is insufficient capital there to cover the transaction.
Remember that if you are trading on margin, you have in effect
got a loan from your broker for the amount you are trading.
If you had a 1.0 lot position your broker has advanced you
the $ 100,000 even though you did not actually have $ 100,000.
The broker will normally charge you the interest differential
between the two currencies if you rollover your position.
This normally only happens if you rolled over the position
and not if you open and close the position within the same
business day. If the first named currency has an overnight
interest rate lower than the second currency then you will
pay that interest differential if you bought that currency.
If the first named currency has a higher interest rate than
the second currency then you will gain the interest differential.
To simplify the above. If you are long (bought) a particular
currency and that currency has higher overnight interest rate
you will gain. If you are short (sold) the currency with a
higher overnight interest rate than you will lose the difference.