A Carry Trade borrows a low-interest currency to buy a higher-interest one, earning the interest-rate difference (the carry) while holding the position. It is a classic forex strategy that works best in calm, trending markets.
How traders trade it
- Profit from the interest-rate gap between two currencies.
- Works best when volatility is low and the trend holds.
- Sharp reversals can wipe out months of accumulated carry.
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Related terms
Related: Forex (FX) · Currency pair · Leverage