Carry-trade trading strategy

How to use forex carry-trade trading strategy to your benefit

Carry-Trade is an investment strategy that has obtained a wide spread support and admiration from traders in the various security markets. Whether you are trading currencies, commodities or equities everybody is raving about this strategy. Even though the strategy is certainly not new it has been getting a lot of attention in the recent years. To explore this strategy further lets start with a discussion what a carry- trade is and then move on to how it works and how it can benefit you.
A carry-trade involves the purchase of a high yielding currency by funding it with a low yielding currency. Most commonly you see the currency pairs where there is significant interest rate spread in carry trades. Some of the common examples are AUS/JPY or NZD/CHF. So since the trade depends on the interest rates being offered by the various economies it’s important to find out about the currencies whish give a higher yield and the ones that give a lower yield. Traders can easily get this information by visiting the websites of the central banks of the various countries or by visiting DailyFX.com or other similar websites. The information will usually be presented in a tabular form with the interest rates being quoted as percentages.

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