1. What is Carry Trade?

Carry trade is a strategy in forex trading where a trader sells a currency with a low interest rate and uses the funds to purchase a currency with a higher interest rate. The trader earns the daily interest rate differential (swap rate) between the two currencies.

2. How Does the Calculator Work?

The calculator uses the carry trade formula:

Where:

• \( Swap\ Rate \) — The interest rate differential between the two currencies (in pips)
• \( Position\ Size \) — The size of your position in lots
• \( Days \) — The number of days you hold the position

Explanation: The formula calculates the total carry you would earn (or pay) for holding a position over a certain number of days, based on the swap rate.

3. Importance of Carry Calculation

Details: Calculating carry is crucial for forex traders employing carry trade strategies, as it helps estimate potential profits or costs from holding positions overnight.

4. Using the Calculator

Tips: Enter the swap rate in pips (can be positive or negative), position size in lots (standard lot = 100,000 units), and number of days you plan to hold the position.

5. Frequently Asked Questions (FAQ)

Q1: What is a pip in forex trading?
A: A pip is the smallest price move that a currency pair can make, typically 0.0001 for most pairs (except JPY pairs where it's 0.01).

Q2: How is swap rate determined?
A: Swap rates are based on the interest rate differential between the two currencies in a pair, plus a broker's markup.

Q3: Can carry be negative?
A: Yes, if the swap rate is negative, you'll pay interest rather than earn it when holding positions overnight.

Q4: Does position size affect carry?
A: Yes, larger positions will generate proportionally more (or pay more) in carry.

Q5: When is carry credited/debited?
A: Typically at 5pm EST (rollover time) for positions held overnight. Triple swaps occur on Wednesdays to account for weekend.