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The Carry Trade is a very popular trading strategy, especially among traders who do not like to engage in various trading analyses and thus prefer to bet on smaller but constant earnings from varying interest rates.
Yes, this is exactly what Carry Trade is all about. With this great strategy, the trader sells a currency at a lower interest rate and buys a currency at a higher rate with the "earned" funds. In the case of Forex, however, you only need to make one trade entry because the interest rate differences are already reflected here in the form of either a positive or negative daily swap.
How to find out the swap size?
Finding out the swap size is not difficult, in the MT4 trading platform you just need to right click on a specific currency pair in the market window and select "Specifications" from the menu. Once selected, a new window will open (see chart below) in which both daily swaps for the respective currency pair are listed (In the case of Carry Trade, entries occur only in the direction of the positive swap -> yields a profit, if both swaps are negative, you need to search for another currency pair). Please note that the swap may not always be given in points, as below, and so for a correct calculation it is also necessary to make sure what the swap is calculated in (this is also shown in the "Specifications" window).
Forms of Carry Trade
The simplest form of Carry Trade is speculating on just one currency pair, but many traders who use Carry Trade tend to rely on trading multiple currency pairs simultaneously to reduce the potential risk from rapid exchange rate changes. There are even traders who use Carry Trade in a way where they trade a single currency pair with multiple brokerage companies, as sometimes these companies have such different swaps. (this happens, but not very often) It is than possible to profit from Carry Trade in this way with almost no risk and often with a relatively high margin.
Our today's strategy performs best on currency pairs that have large interest rate differentials, which of course usually has an impact on the size of the positive swap.
