Carry Trades but how?

Hi All,

i’ve been hearing that Carry trades can be profitable because the way it works is you make profit based on the Interest rate differential. I’ve read some theory on this but I havent seen how they do it. Is it the same as a Swap trade?

I was wondering if someone could explain or post a link to explain on how to execute a carry trade…and of course if you have a great working system , pls feel free to share it with everyone.

Thanks guys !


I believe BabyPips school has a short bit on this subject - and someone correct me if I am in error as I don’t really look to trade based on swap/carry interest.

More or less you buy near the weekend to hold for interest over the weekend with a pair with a high interest rate differential. If doing it solely for a swap (carry) then you might look for a pair that is not just favorable on interest but also going in the “right” direction (if you are buying for interest the pair is in buy - or if selling the pair is in sell direction already), so that you don’t lose money on the trade and eat your interest profit. I had a demo trade where on two full lots of USD/CHF I made $4.47 … but every pip bad would eat maybe $18 of equity so definately want that trade to be profitable otherwise. In this case it was good for 25 pips which seem more important than the less than $5 swap… I could have lost on the swap interest and been further ahead than if I had a losing trade and a small amount of swap interest.

I would guess if you were very careful, last minute trade made beforethe weekend, a very tight stop loss and johnny on the spot to close the carry trade when the market opened you might be able to get some profit week in and out on this. For me it isn’t too practical in that sense …perhaps it could be done with a tight take profit limit if you can’t be on the computer when the market reopens? An idea.

Best wishes…

Carry Trade Criteria

Looks like perhaps they mean buy and hold for the interest and the potential pip gains long term. So perhaps that is different than the idea of holding temporarily for the interest. In any case I think you need profit (at least regaining your spread or commission fees) or else you’d likely be losing rather than gaining.

This weekend I accidentally carried trade. Here’s what happened. on Friday evening the EUR/JPY i entered a short position using leverage of (-60,000 at 162.99 cause I was getting signals the EUR/JPY was overbrought, however it continued to go against me as it rose to 163.30 by closing friday i was showing a unrealized loss of $218.00 I did not set a stop loss. The loss carried into the weekend.

On Sunday the Asian market opened down the eur/jpy at 162.62 (in my favor). I recovered the $218 loss plus a profit of $128.00

I didnt know this would happen, i was actually planning to close off my losses on Sunday.