What are Rollover Free Accounts?
Forex trading consists of changes and interest for overnight positions, which are taken from the traders. However, some people don’t support interest fees/ extra charges, which are also known as rollover fees. Most importantly, Muslims refrained from forex trading due to interest charges, as interest is prohibited in Islam. So, the broker came out with an idea of a new account type called rollover free accounts (sometimes called a swap-free account), which don’t charge any overnight rollover fees.
Most of the traders are not quite familiar with rollover free accounts. Keeping them in mind, we will provide all the details of these account types. First, let us provide you an idea about rollover fees.
What are the Rollover Fees?
A rollover fee is charged if you keep your position open overnight. It is also widely known as a swap. However, the swap is considered as the difference in the interest rate between the two currency pairs you are trading. Usually, it is calculated as per your position is short or long.
But you should keep in mind that interest rate or swap fees depend on your order. This means buy and sell may have different swap rates. And, that’s why it is not necessary that swap will be considered as interest always.
What is Rollover Free Accounts?
Forex trading contains a variety of charges, which are charged in the form of interest. This kind of interest is not calculated. Rollover free or swap-free accounts are applicable for the traders who are not permitted to deal with any interest or swaps due to religious obligations. The rollover free account is created for the Muslims as they are not allowed to take or provide any interest benefits. However, both MetaTrader 4 forex brokers and MetaTrader 5 forex brokers offer this type of account.
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Features of Rollover Free Accounts
May traders really want to do trading without any complexity of rollover fees. They tend to remove the risks that come from swaps and can rise overnight. Sometimes¸, traders also like the swap system as they want to gain from the swaps. However, rollover free accounts have some attractive features that might be beneficial for some specific traders.
Beneficial for Islamic Traders
This type of account is highly useful for the Muslims as they are getting what the religion permits. So, rollover free accounts ultimately encourage the Islamic traders to begin forex trading. However, they will have to prove themselves to get the benefits of rollover free.
Duration of the Position
Since it doesn’t incur any interest in holding the position overnight, some traders may want to take the benefits of it and may keep the position for a longer period. That’s why brokers put some bindings such as expiration dates. Usually, the maximum duration of the position could be three to ten days in total. However, it depends on the brokerage. Moreover, a broker may set a set commission for holding the position, which is not calculated as the interest rate.
Commission
Free from rollover fees doesn’t mean that it can be free from any overnight commission. The truth is some charge fees as commission, which is essentially the replacement for rollover fees.
The commission rate depends on the broker. For example, some brokers may charge fixed fees for an overnight position. On the other hand, some may charge variable fees depending on some position factors. However, none of the charges are calculated as the difference in interest rates. But the commissions are calculated as the pair type and trading lot’s size.
In most cases, brokers charge a fixed commission rather than the dynamics of interest rates.
Trading Condition
Swap-free or rollover-free features are not the only things the broker focuses on while offering these kinds of accounts. Besides, the brokers may offer some extra features through the regular accounts with their own specifications.
So, if you register with a broker that provides rollover free accounts, you should read their terms and conditions before signing up. Checking the terms will help you to make use that these don’t apply any contrast with your regular trading conditions.
Benefits of Trading with Rollover Free Accounts
Depending on the market position, some currency pairs may get affected positively or negatively on rollover. If it is positive, you are getting paid, and for the negative rollover, you will have to pay. Either way, it is risky. On the other hand, rollover or swap-free forex accounts offered by the best forex broker neither force you to pay anything nor paying anything to you.
Usually, the rollover fees are charged if you hold a position part 5:00 pm. But a rollover free account doesn’t charge any fees even if you hold the position until the next day. So, you can keep your position open without being worried about any variable charges. However, you may need to pay some fixed fees.
This kind of account is a good option for traders who have a long-term trading strategy, such as holding the position for more than a day or sometimes up to a month.
Rollover free forex accounts are for applying carry trade as well as hedging strategies, where traders make money from holding currencies by paying a small fixed commission.
Limitations of Rollover Free Accounts
Everyone cannot use swap-free trading accounts. It is available to only those traders who cannot use swaps due to their beliefs. So, if a trader requests a swap-free account, it is subject to verify the details and intention. Besides, traders are not allowed to open a rollover free account if their primary purpose is to make profits from swap only.
Conclusion
Although rollover free accounts are not for all types of traders, it imposes restriction. Only some specific kind of traders are allowed to trade via rollover free accounts, such as Muslims. However, before starting with a swap-free account, a trader should check out the forex broker reviews to know all the broker’s terms and conditions.
Rollover free account holders will get all the benefits of the forex trading platforms, such as live market updates, indicators, news, expert advisors, and more.
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