What is overnight position?
An overnight position is held beyond the session close. Allowed by most forex firms, it is frequently prohibited on the futures segment, where intraday trading is the norm.
The rule draws a clear line between the market’s two main segments.
Forex versus futures
On forex, holding a position past the close is the norm. The market runs continuously from Sunday evening to Friday evening, and the notion of a daily close is largely conventional.
On futures, the prohibition is common. Many firms require all positions closed before a specific hour, often 5 p.m. New York time. The reason is twofold: overnight margin requirements on futures contracts are higher, and the risk of a gap at the reopen is real.
The cost of carry
On leveraged instruments, holding a position past the close generates a financing charge — the swap. Positive or negative depending on direction and rate differential, it accrues every night.
On a position held for several weeks, that cost can represent a meaningful share of the expected result. Check whether the firm applies swaps, and at what rate: some remove them on their so-called swing accounts, others pass on their partner broker’s tariff.
Gap risk
This is the point that genuinely matters on a prop firm account. An opening gap can cross your drawdown floor with no order able to execute between the two prices.
A stop-loss does not protect against this: it becomes a market order filled at the first available price, sometimes far below. On a personal account, that is a heavier loss than planned. On a prop firm account whose margin is measured to the cent, it is permanent closure.
The defence is sizing: a position held overnight must be calibrated to survive an adverse gap, not merely a continuous move.
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Related terms
- Equity Equity is the value of a trading account with open positions included, unlike balance which counts only closed trades. Most prop firms calculate their risk limits on equity.
- Swing trading Swing trading holds positions for several days or weeks. On a prop firm account it requires overnight and weekend holding to be allowed, and it sits badly with an intraday trailing drawdown.
- Trailing drawdown A trailing drawdown is a loss limit that follows the account's gains upward: every new high raises the floor the account must not fall below. It exists in an end-of-day form and a far stricter intraday form.
- Weekend holding Weekend holding means keeping a position open through the weekly market close. Allowed by most forex firms, it is very often forbidden on the futures segment.