Carry Trade

Carry trade is a popular trading strategy used in the Forex markets. When a currency with a low interest rate is sold to purchase a currency that pays a high interest rate, it is called carry trade. The difference in the interest rates of the two currencies is called the interest rate differential and it is the interest rate differential that is the profit a trader makes. The objectives of carry trade involve making money on the interest rate differential and gaining profit from the capital appreciation. If the carry trade pair appreciates in value, it is better return on the initial investment. The biggest risk in a carry trade strategy is the absolute uncertainty of the exchange rates.

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