Currency Carry Trades Strategy
Currency carry trades strategy is one of the most used Forex trading strategies, which especially work well when the currencies of the pair stay study. Carry trades are the products of currency rollovers, and are designed for magnify the effect of interest rate difference between currencies.
The principle behind carry trades is simple; you buy a currency of higher interest rate like New Zealand Dollar (NZD) or Australian Dollar (AUD) spending lower interest rate currency like Japanese Yen (JPY) or Swiss Franc (CHF) you may have an interest rate difference around 5%, which approximately equals a profit of $13 per day for a standard lot. Remember if you are only trading with $1000 and using 100:1 margin. Trades can maximize the profit by increasing the trading lot, by retaining the pair for an extended period and by increasing the leverage.
Carry trades are advantageous when the currency you buy yields over the other, when Central Bank increases or going to increase the interest rate of the purchased currency, when Central Bank reduces interest rate of your sold currency, and when the market is less volatile. But carry trades may product adverse effects when your purchased currency goes down, when purchased currency exchange rate decreases, when sold currency exchange rate increases, when market is highly volatile. Remember the profit or loss of carry trades produces much diminished effects than actual currency price fluctuations.
The principle behind carry trades is simple; you buy a currency of higher interest rate like New Zealand Dollar (NZD) or Australian Dollar (AUD) spending lower interest rate currency like Japanese Yen (JPY) or Swiss Franc (CHF) you may have an interest rate difference around 5%, which approximately equals a profit of $13 per day for a standard lot. Remember if you are only trading with $1000 and using 100:1 margin. Trades can maximize the profit by increasing the trading lot, by retaining the pair for an extended period and by increasing the leverage.
Carry trades are advantageous when the currency you buy yields over the other, when Central Bank increases or going to increase the interest rate of the purchased currency, when Central Bank reduces interest rate of your sold currency, and when the market is less volatile. But carry trades may product adverse effects when your purchased currency goes down, when purchased currency exchange rate decreases, when sold currency exchange rate increases, when market is highly volatile. Remember the profit or loss of carry trades produces much diminished effects than actual currency price fluctuations.
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posted by NobleTrading at
7:23 AM
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