Tomorrow-next Rollover (Tom/Next Rollover)

Last verified 5 Nov 2025·How we review

The Tomorrow-next Rollover, often abbreviated as Tom/Next Rollover, is a forex trading process that moves the settlement date of an open position to the next trading day, avoiding the delivery of the currency. This is a crucial mechanism for forex traders who wish to maintain a position without actually taking delivery of the currencies traded.

What it means

In the forex market, the settlement of trades typically happens two business days after a trade is executed. However, traders who wish to hold a position for a longer duration use the Tomorrow-next Rollover to extend the settlement date. By doing so, they can continue to speculate on currency movements or hedge against them without the need for physical delivery.

Why it matters

The Tom/Next Rollover is fundamental in forex trading for several reasons:

• Liquidity Maintenance: It allows traders to maintain liquidity since currencies are not physically exchanged.
• Position Extension: Traders can extend their positions beyond the standard two-day settlement period without interruption.
• Risk Management: It serves as a tool for risk management, enabling traders to hedge against potential losses due to currency fluctuations.

How it works

The process involves two simultaneous transactions:

1. Closing the existing position: The first transaction involves selling (or buying) the currency pair at the close of the trading day to settle the original position.
2. Opening a new position: Simultaneously, a new position is opened for the same amount at the beginning of the next trading day, effectively rolling the position over.

This sequence allows the trader’s position to continue without the actual delivery of the currencies involved.

Common use cases or examples

• Speculative Trading: A trader expecting the EUR/USD pair to rise in the long term may use Tom/Next Rollover to hold their position over several days or weeks.
• Hedging: A business that expects to make or receive payments in a foreign currency might use the Tom/Next Rollover as part of its risk management strategy to hedge against adverse currency movements.

Benefits and potential risks

Benefits

• Flexibility: Traders gain the ability to maintain positions for an extended period, providing greater flexibility in trading strategies.
• Avoidance of Physical Delivery: It eliminates the complexities and costs associated with the physical delivery of currencies.
• Risk Management: It offers an effective tool for managing exchange rate risk.

Potential Risks

• Rollover Costs: The process may involve costs, such as the bid/ask spread each time the position is rolled over, which can impact profitability.
• Interest Rate Differentials: The interest rate differential between the two currencies in the pair can result in charges or credits to the trader, affecting the outcome of the trade.

Conclusion

The Tomorrow-next Rollover is an essential concept in forex trading, providing significant flexibility and risk management capabilities. However, traders must be mindful of the costs and potential impacts of interest rate differentials when deploying this strategy. Understanding how Tom/Next Rollover works is fundamental for anyone looking to actively engage in the forex market or manage currency risk effectively.