A1 Trading Company

July 3, 2021

How to Carry Trade

Theo Ashley-Hacker

A Carry Trade involves selling a currency at a low interest rate and purchasing a currency that has a a high interest rate with the intention of gradually yielding a profit over time. You can think about it like buying a stock for dividends.

At the moment interest rates are near all time lows as Banks around the world tried to spur spending. This means that carry trading holds a low incentive as the biggest range in interest rates you can currently trade is 1%. This is historically very low and means carry trading is not very lucrative.

However as economic growth picks up and inflation rises, Central Banks around the world are looking at the possibility of re-raising interest rates. This opens the opportunity to carry trade.

How do you Carry Trade?

The incentive behind carry trading is that the odds are always in your favour. We know that interest rates are the biggest influencer of currency markets, so by trading in the direction of the currency with higher interest rates, we not only stand to profit from interest, but also stand a high chance of profiting by the currency we've bought appreciating while we hold it.

To enter a carry trade you can either find a currency pair with a large difference in rates or try to predict future rate changes, this is more risky but carries more potential for profit as shown by the incredible dollar bull run after the Fed announce they intend to hike interest rates.

Your broker will give you a quote for overnight swap, if your buying a currency with a higher rate than the one your selling this will be likely be positive meaning you will be paid and vice versa.

You should also check for economic news related to the currency your selling, high CPI and retail sales figures may be signs you should look for a different pair.

A1 Edgefinder

All-In-One Fundamental Dashboard!
Simplify your fundamental analysis with our all-in-one fundamental dashboard! 
Discount code: READER

Learn more

My Crazy Trade On Gold: Up $8000

Hey Traders! This week has been wild for Gold! Thanks to insights from the EdgeFinder, I've been in a trade on XAUUSD since May 3rd. Initially, I jumped in due to weak jobs and PMI data, sticky inflation, and solid support/market structure. Here’s a quick look at my gold trade: Entry Recap: On May 13th, […]

Read More
Is Gold the Buy of 2024?

Rates move lower after the BoE announced their latest monetary policy report to keep rates unchanged at 5.25%. Unemployment came in higher this morning with the 30-year bond auction coming up Thursday afternoon. In the midst of a slow news week in the US, gold is sitting at a very favorable position according to the […]

Read More
Yields Fall Ahead of Earnings

More earnings reports come out this week is causing an inflow of buyers in the equities market while yields begin the week on a decline. Last week's Fed meeting showed up as "less hawkish" than investors expected causing risk appetite to increase at the start of the summer months. EdgeFinder Analysis As we come off […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
Signals
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenucross-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram