Preschool>= Lesson Status ?
Kindergarten>= Lesson Status ?
Elementary>= Lesson Status ?
Grade 1 Support and Resistance Levels
Grade 2 Japanese Candlesticks
Grade 3 Fibonacci
Grade 4 Moving Averages
Grade 5 Common Chart Indicators
Middle School>= Lesson Status ?
Grade 7 Important Chart Patterns
Grade 8 Pivot Points
Summer School>= Lesson Status ?
High School>= Lesson Status ?
Grade 9 Trading Divergences
Grade 10 Market Environment
Grade 11 Trading Breakouts and Fakeouts
Grade 12 Fundamental Analysis
Grade 13 Currency Crosses
- What is a Currency Cross Pair?
- Crosses Present More Trading Opportunities
- Cleaner Trends and Ranges
- Taking Advantage of Interest Rate Differential
- Obscure Crosses
- Planning Around News and Fundamentals
- Creating Synthetic Pairs
- Euro and Yen Crosses
- How to Use Crosses to Trade the Majors
- How Cross Currency Pairs Affect Dollar Pairs
- Summary: Currency Crosses
Grade 14 Multiple Time Frame Analysis
Undergraduate>= Lesson Status ?
- Why Keep a Trade Journal?
- Benefits of Keeping a Journal
- What Should You Record in Your Journal?
- Potential Trading Area
- Entry Trigger
- Position Sizing
- Trade Management Rules
- Trade Retrospective
- Trading Journal Statistics
- Reviewing Your Trading Journal
- Difficulties of Keeping a Trade Journal
- Summary: Keeping a Trade Journal
Graduation>= Lesson Status ?
- Which Trading Style is Best for You?
- Which Currencies Should You Trade?
- What is Your Level of Trading Experience?
- Should You Be a Discretionary, Mechanical, or Hybrid Trader?
- What Kind of Mechanical System Suits Your Personality?
- What is Your Attitude Towards Risk?
- What Kind of Stop Suits Your Trading Style?
What is Carry Trade?
Did you know there is a trading system that can make money if price stayed exactly the same for long periods of time?
Well there is and it's one the most popular ways of making money by many of the biggest and baddest money manager mamajamas in the financial universe!
It's called the "Carry Trade".
A carry trade involves borrowing or selling a financial instrument with a low interest rate, then using it to purchase a financial instrument with a higher interest rate.
While you are paying the low interest rate on the financial instrument you borrowed/sold, you are collecting higher interest on the financial instrument you purchased. Thus your profit is the money you collect from the interest rate differential.
Let's say you go to a bank and borrow $10,000. Their lending fee is 1% of the $10,000 every year.
With that borrowed money, you turn around and purchase a $10,000 bond that pays 5% a year.
What's your profit?
You got it! It's 4% a year! The difference between interest rates!
By now you're probably thinking, "That doesn't sound as exciting or profitable as catching swings in the market."
However, when you apply it to the spot forex market, with its higher leverage and daily interest payments, sitting back and watching your account grow daily can get pretty sexy.
To give you an idea, a 3% interest rate differential becomes 60% annual interest a year on an account that is 20 times leveraged!
In this section, we will discuss how carry trades work, when they will work, and when they will NOT work.
We will also tackle risk aversion (WTH is that?!? Don't worry, like we said, we'll be talking more about it later).
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- What is Carry Trade?
- How Do Carry Trades Work for Forex?
- To Carry or Not to Carry
- Carry Trade Criteria and Risk
- Summary: Carry Trade