Carry trade is a popular trading strategy that is based on buying a high-yielding asset with the low-yielding asset, so that the cost of loan is less than the yield of the asset you’ve bought. In Forex, carry trade is based on buying a currency pair with a high positive interest rate difference (swap) or selling a currency pair with a high negative interest rate difference. The good current examples of the long carry trade pairs are AUD/JPY, ZAR/JPY, HUF/JPY and of the short carry trade pairs — USD/ZAR and USD/HUF. Often such trades yield not only the interest rate difference but also a normal position profit based on the buy/sell price difference; this happens when the market becomes driven by the carry traders. But this strategy is also quite dangerous as the interest rates fluctuate and the currencies with the high yields are usually very unstable. During my more than 4 years long experience as a Forex trader I had a carry trade position open only once and it wasn’t very successful. And how about you?

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