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.
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.
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.
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