Understanding Carry Trades in Forex

If you have been in the Forex trading industry for a long time, chances are, you might have already heard of the term carry trade. In this article, we’ll share to you our knowledge about this amazing trading strategy.

carrytrade1.jpg

Carry trades, in fact, isn’t only used in the forex trading industry, but also in other financial markets such as stocks, bonds and commodity markets. It is a pretty solid strategy most experienced traders use to take advantage of the difference between the interest rates of two different securities.

Most often, this strategy works when the trader or an investor sells a particular currency that yields a significantly low interest rate and and uses the funds to buy another currency with a relatively higher interest rate. The objective of the investor using this strategy is to profit from the difference between the interest rates, which are often of a considerable amount, depending on the amount of leverage used.

carrytrade2.jpg

Aside from profiting from the difference in the interest rates, the investor can also make some considerable amount of profit from the movement of the interest rates of the two currencies. To make the most of this strategy, you must attempt to sell a currency with a steady or declining interest rate and use the funds to purchase a different currency with an inflating interest rate.

With the right broker, plan of action, timing and currency pair, this kind of strategy can help you significantly improve your profitability in Forex Trading.

Further expand your understanding of the forex market and learn more about forex trading by visiting our official blog sites. Find out what other traders say about NetoTrade, eToro, MXTrade, Trade12 and other best forex brokers, visit Wibestbroker.com and see!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s