Discover the Secret to Successfully Trading the Overnight Market!

Jakarta, Pintu News – Have you ever heard of overnight trading? The term refers to currency buying and selling transactions that take place outside of the main exchange’s business hours, usually between 21:00 and 08:00 local time. This activity is often done by investors who want to take advantage of overseas market movements that are still open when the local market has closed.

Definition of Overnight Market

The overnight market is a part of the money market that involves very short-term lending, i.e. overnight only. In this market, the loaned funds must be returned the next day along with interest. Due to the short duration of the loan, the interest rate charged is generally the lowest rate that banks charge for lending money, known as the overnight rate.

Most activity in the overnight market happens in the morning, when the working day starts. This happens because financial institutions often need large amounts of money at the start of the day, sometimes more than they have on hand. Therefore, they borrow from the overnight market. Conversely, if financial institutions have surplus funds, they may choose to lend them out in the overnight market.

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Overnight Interest Rate

The overnight interest rate is the rate at which large banks lend and borrow to each other in the overnight market. In some countries, such as the United States, these rates can be directed by central banks to influence monetary policy. Central banks in most countries also participate in the overnight market, lending or borrowing money to other large banks.

Overnight interest rates exist because during the course of the day, banks will exchange money with each other. At the end of the business day, a bank may have excess or shortage of funds. Banks that have extra funds will deposit or lend them to other banks in need. The interest rate paid to the lender by the borrower is the overnight rate.

Overnight Index Swaps and Stop Loss

An overnight index swap (OIS) is an interest rate swap in which a floating periodic payment is usually based on the specified return of a daily interest investment. The reference for this interest rate is the overnight rate. OIS is considered a less risky interest rate than LIBOR because the interest rate is fixed and the counterparty risk is lower.

A stop loss order is an order given to a broker to sell a security when it reaches a certain price. These orders are designed to limit losses from positions taken by investors. These orders are very useful in protecting trades, especially if the investor is unable to monitor his trades, such as in overnight trading.

Conclusion

Overnight trading offers exciting opportunities but also high risks. Understanding market dynamics such as overnight interest rates and the use of tools such as stop loss orders can help mitigate such risks. Investors who wish to engage in this kind of trading should do their research and be well prepared.

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*Disclaimer

This content aims to enrich readers’ information. Pintu collects this information from various relevant sources and is not influenced by outside parties. Note that an asset’s past performance does not determine its projected future performance. Crypto trading activities are subject to high risk and volatility, always do your own research and use cold hard cash before investing. All activities of buying andselling Bitcoin and other crypto asset investments are the responsibility of the reader.

Reference

• Capital.com. Overnight Definition. Accessed on July 29, 2025