Category: 3. Carry Trade

A carry trade is when you borrow one financial instrument (like USD currency) and use that to buy another financial instrument (like JPY currency). While you are paying the low interest rate on the financial instrument you borrowed/sold, you are collecting higher interest on the financial instrument you purchased. Your profit is the money you collect from…

Let’s go over the criteria for a carry trade. It’s pretty simple to find a suitable pair to do a carry trade. Look for two things: Find a high interest differential. Find a pair that has been stable or in an uptrend in favor of the higher-yielding currency. This gives you the ability to stay…

When do carry trades work? Carry trades work best when investors feel risky and optimistic enough to buy high-yielding currencies and sell lower-yielding currencies. It’s kinda like an optimist who sees the glass half full. While the current situation might not be ideal, he is hopeful that things will get better. The same goes for carry trade. Economic conditions…

In the forex market, currencies are traded in pairs (for example, if you buy USD/CHF, you are actually buying the U.S. dollar and selling Swiss francs at the same time). You pay interest on the currency position you SELL and collect interest on the currency position you BUY. What makes the carry trade special in the spot forex…

Did you know there is a trading strategy that can make money if the price stayed exactly the same for long periods of time? Well, there is and it’s one the most popular ways of making money by many of the biggest and baddest money manager mamajamas in the financial universe! It’s called the “Carry…