A trade where you borrow and pay interest in order to buy something else that has higher interest.The carry of an asset is the return obtained from holding it (if positive), or the cost of holding it (if negative) (see also Cost of carry).For instance, commodities are usually negative carry assets, as they incur storage costs, but in some circumstances, commodities can be positive carry assets as the market is willing to pay a premium for availability. ForexTradingPal.com tells you everything you need to know about all Forex trading strategies. Visit forextradingpal.com for all you need to know about: Forex Carry Trading. It revolves around the interest rates of the different currencies. In fact, it lends itself to any asset, but the currency market is the simplest forum to practice it. customized sales training.

Carry trading is all about borrowing or selling a currency which attracts a low interest rate, and using it to fund the purchase of one with a high interest rate. When we talk of interest, we are referring to the interest rates set by the Central Bank of a particular country.
To understand how it works, let us use the analogy of a bank. Suppose you borrow money from an entity which charges a low interest rate, and deposit it at another which offers high rates of interest, you can pay off the interest on the borrowed money out of the interest paid by the place you have deposited money in, and keep the difference. Currency Carry Trade works on the same principle.
If you borrow a currency, the Japanese Yen, for instance, at 0.5 percent interest, and use the money to buy the New Zealand dollar, which earns you 7.5 percent interest in that country, you can pay off the 0.5 interest in Japan, and voila! You are richer by a cool 7 percent.

When looking for suitable currencies to do Forex carry trading, you need to look for a pair where there is a substantial difference in interest. You also need to make sure that the differential trend has been consistent for some time.
You also get to benefit from interest gains, because carry trade gives you the advantage of leverage. This is the way it works: supposing you open a trade for a mini lot worth $10,000, but actually use only $250 to make the trade, you profit by the differential interest on the traded amount, plus, your broker will have to pay you daily interest on the whole $10,000. So that works out to quite some money on an annual basis.

But remember, carry trading like any other form of trading, is not risk free. You need to know that your deal is subject to fluctuations in the currency market, and if the interest rates in the two countries whose currencies you've chosen to trade in do a flip flop, you may well end up losing money.
Also, remember that there is often a catch to the offer of high interest rates. The concerned country might be experiencing a bout of political instability, or might be suffering from a large current account deficit in relation to the GDP.
Again, when you use your Forex trading terminal to make a Carry Trade, you will receive a daily interest for as long as you hold your position. But note that you will most likely have to pay your brokers an interest for holding overnight positions. So your dues would be deducted from theirs, and the amount accrued to you will usually be under the column marked 'swap' in your account statement.
But the final reckoning is: choose a good pair at a good time and you are sure to enjoy the excitement of Carry Trading plus the money it will put in your pocket. Visit Forex Trading Pal.com today!