Carry Trade Calculator

How Carry Trades Work

A carry trade earns interest by borrowing a low-interest-rate currency and buying a high-interest-rate currency. Every day you hold the position, your broker credits (or debits) a swap payment based on the interest rate differential between the two currencies. This is separate from any profit or loss from price movement — it's pure yield.

For a long position, you earn the base currency's interest rate and pay the quote currency's rate. If the base rate is higher than the quote rate, you earn positive carry. For a short, the opposite — you earn the quote rate and pay the base rate. The daily swap amount is credited to your account each rollover (typically 5 PM EST).

Because forex is leveraged, the annual return on margin can be significant — a 3% interest differential on a 30:1 leveraged position becomes a ~30% annual return on the margin locked. This is why carry trades are popular among long-term forex traders. Use the position size calculator to determine the right lot size for your account.

Best Carry Trade Pairs

Risks of Carry Trading

Carry trades are not risk-free. The biggest risk is exchange rate movement — a pair can move 1-2% in a single session, wiping out months of accumulated carry. Central bank rate changes can shrink or reverse the interest differential overnight. And during market turmoil, carry trades tend to unwind violently as traders flee to safe-haven currencies. Monitor volatility levels — high ATR pairs may erase your carry gains faster than you earn them.

Frequently Asked Questions

What is a carry trade in forex?

A carry trade borrows a low-interest currency to buy a high-interest currency, earning the interest rate differential (the carry). You earn positive swap each day the position is held. For example, buying AUD/JPY earns the difference between Australia's 4.10% rate and Japan's 0.50% rate — approximately 3.60% annually on the position size.

How is forex swap calculated?

Daily swap = Position Size × (Base Rate − Quote Rate) / 365. For a long position, you earn the base rate and pay the quote rate. Brokers may apply a multiplier (1× standard, 3× on Wednesdays to cover the weekend).

Which forex pairs are best for carry trades?

The best carry trade pairs have a wide interest rate spread: long AUD/JPY, NZD/JPY, USD/MXN, and USD/TRY offer positive carry. Avoid pairs where you'd pay carry (short high-yield currencies). Check current central bank rates — rate changes can flip carry from positive to negative.

What are the risks of carry trading?

The main risk is exchange rate movement wiping out your carry gains. A pair can move 1-2% in a day, erasing months of carry. Central bank rate changes can shrink or reverse the differential. Carry trades tend to unwind violently during risk-off events.