Forex Carry Trade: Earn Interest While You Trade Currencies
Forex · 11 min · Published 2026-03-29
Master the forex carry trade strategy. Covers interest rate differentials, rollover, and risk management. Free guide at Tradyom by Rami Alame.
The carry trade borrows in a low-interest-rate currency and invests in a high-interest-rate currency, profiting from the interest rate differential. For example, borrowing JPY (low rate) to buy AUD (high rate) earns the rate difference daily. The carry trade also profits from potential currency appreciation.
Frequently Asked Questions
How much can I earn from carry trades?
With a 4% interest rate differential and 5:1 leverage, the annual carry income is approximately 20% of your margin. However, currency fluctuations can easily exceed this — the carry is a bonus, not the primary profit driver.
When do carry trades fail?
During risk-off events (market crashes, geopolitical crises), carry trades unwind rapidly as traders exit high-yield currencies for safe havens (JPY, CHF, USD). The 2008 financial crisis saw carry trades lose years of accumulated interest in weeks.