Traders may choose to hold positions overnight in order to further increase existing profits, or in the hope that a losing position may retrace or turn into a profit on the following day. However, it is important to fully understand the additional risks that may arise when holding positions overnight.
1. Holding positions overnight increases your trading costs.
Trading fundamentally involves transactions based on exchange rate movements between two currencies. Each currency has its own interest rate. Therefore, when you trade currency pairs with KCM Trade, you are simultaneously exposed to two different interest rates.
Taking EUR/USD as of June 13, 2023 as an example:
- If you intend to hold a long position (Buy) overnight, it means you are bullish on the Euro and bearish on the US Dollar.
- If the interest rate of the Euro you are buying is lower than the interest rate of the US Dollar you are selling, a negative swap (overnight interest) will be incurred.
- This will increase your trading cost by approximately 6.767 USD per lot.
📌 Important reminder: Positions held overnight on Wednesday will typically incur triple swap (overnight interest). Please plan your funds accordingly.
2. Unexpected events and key data releases may cause additional losses.
The financial markets operate 24/5 continuously. When your time zone has entered late night hours and you still have open positions, the market may experience sharp fluctuations due to unexpected events or major data releases. These variables may not have been taken into consideration when you placed your orders.
For example:
- The Federal Reserve interest rate decision is typically announced at 2:00 AM Beijing time.
- If the results exceed market expectations significantly, it may lead to a sudden drop in liquidity, a sharp widening of spreads, or price gaps, which could in turn trigger account stop-outs or cause additional losses.
💡 KCM Trade Friendly Reminders:
- Overnight interest charging time
For KCM Trade platform time and swap charging hours, please refer to the table below. Actual rates and times are subject to the specifications shown in the MT4 contract specifications.
2. Advice for beginners
If you are new to trading, we recommend prioritizing intraday trading. Holding positions overnight may expose you to the risks described above, and may also affect your sleep quality and trading performance the following day due to psychological pressure.
3. Experienced traders may assess and decide accordingly
If you already have a well-established trading system and have strong reasons to believe that holding positions overnight offers a better cost-to-profit opportunity, and market conditions are favorable, overnight positions may help you capture larger trend movements.
