Trading Styles
Intermediate
Carry Trade
Also called: carry
Borrowing in a low-yield currency and investing in a high-yield currency to capture the interest rate differential.
Definition
The classic carry trade: long AUD/JPY when AUD rates are above JPY rates — collect swap nightly, gamble on no major risk-off event. Historically profitable in calm markets, devastating during shocks (2008, 2015 CHF crash, etc.).
Example
Long AUD/JPY with positive swap of $13/day per lot, hold for 30 days = $390 in carry, before P&L on the pair itself.