If you’ve ever placed a forex trade, you might notice your P/L (profit & loss) for that trade shift slightly overnight after the markets have closed. This is what’s known as the carry trade, a payment paid out to or taken from the investor depending on the currency that he has sold and bought. The concept behind the carry trade is fairly simple -> as an investor, we’re looking to borrow money or sell a currency with a low interest rate and purchase the currency with the high interest rate. The result will be a daily payment added to our trade equivalent to the net interest differential between the two countries.
The Carry Trade
The Carry Trade
The Carry Trade
If you’ve ever placed a forex trade, you might notice your P/L (profit & loss) for that trade shift slightly overnight after the markets have closed. This is what’s known as the carry trade, a payment paid out to or taken from the investor depending on the currency that he has sold and bought. The concept behind the carry trade is fairly simple -> as an investor, we’re looking to borrow money or sell a currency with a low interest rate and purchase the currency with the high interest rate. The result will be a daily payment added to our trade equivalent to the net interest differential between the two countries.