Carry Trade Calculator
Calculate potential profits from interest rate differentials between currencies.
Trade Setup
⚡ Results update automatically as you type
Carry Trade Analysis
Forex settles T+2. Wednesday positions held overnight receive 3 days of swap.
- Swap rates vary between brokers and can change
- Price movement can easily exceed swap gains
- Central bank policy changes affect rates
- Actual broker swap may differ from calculated
Understanding Carry Trades
What is a Carry Trade?
A carry trade involves borrowing a low-interest currency to buy a high-interest currency. You earn the interest rate differential as long as you hold the position.
How Swap Works
When you hold a forex position overnight, you receive or pay swap based on the interest rate differential. Long positions in higher-yielding currencies earn positive swap.
Risk vs Reward
While carry trades provide steady income, currency depreciation can quickly wipe out gains. The trade works best when the high-yield currency is stable or appreciating.
🌟 Popular Carry Trade Pairs
* Rates are approximate and subject to change. Always check your broker's actual swap rates.
📋 Carry Trade Strategies
Classic Carry
Buy high-yield, sell low-yield. Hold for months or years. Best in stable, risk-on markets. Avoid during volatility spikes.
Hedged Carry
Use options or correlated pairs to hedge currency risk while capturing the yield differential. Lower returns but safer.
Diversified Carry
Spread across multiple carry pairs to reduce single-pair risk. If one unwinds, others may hold. Smoother equity curve.
Tactical Carry
Combine carry with technical analysis. Enter only when technicals align. Exit on reversal signals or rate changes.
Frequently Asked Questions
What is a carry trade in forex?
A carry trade is a forex strategy where you borrow a low-interest currency to buy a high-interest currency, earning the interest rate differential. Our carry trade calculator helps you estimate potential swap income from these positions.
How do I calculate carry trade profit?
Carry trade profit = (Interest Rate Differential × Position Size × Days Held) / 365. For example, with 4% rate differential on 1 lot for 30 days: (0.04 × $100,000 × 30) / 365 = ~$329. Our carry trade calculator automates this calculation.
Why is JPY always the funding currency?
Japan has maintained near-zero interest rates for decades to stimulate their economy. This makes JPY an ideal funding currency - you borrow cheap JPY to invest in higher-yielding currencies like AUD, NZD, or USD.
What causes carry trade unwinding?
Carry trades unwind during risk-off events (market crashes, geopolitical crises). Traders rush to close positions, causing the high-yield currency to plummet. This is why carry trades can be risky during volatile markets.
Why doesn't my broker's swap match the rate differential?
Brokers add their markup to swap rates. They also factor in their own funding costs and hedging. Some brokers offer better swap rates than others. Compare brokers if carry trading is your main strategy.
Should I use leverage for carry trades?
Leverage amplifies both gains and losses. While it increases swap income, it also increases risk from price movements. Conservative leverage (5:1 or less) is often recommended for carry strategies. Use our carry trade calculator to see the impact.
When do central banks change interest rates?
Central banks meet regularly (usually 8 times per year). Watch the economic calendar for rate decisions from RBA, RBNZ, Fed, BoJ, etc. Rate changes can significantly impact carry trade profitability.
What are the best currency pairs for carry trading?
Popular carry trade pairs include AUD/JPY, NZD/JPY, USD/JPY, and GBP/JPY. These pairs offer significant interest rate differentials. Our carry trade calculator shows current rate differentials for major pairs.
How does the triple swap day work?
Forex settles T+2 (two business days). Wednesday positions held overnight receive 3 days of swap to account for the weekend. This means triple swap on Wednesday nights - a significant consideration for carry traders.
What risks should I consider with carry trades?
Key risks include: (1) Currency depreciation can exceed swap gains, (2) Central bank rate changes, (3) Risk-off market sentiment causing unwinding, (4) Leverage amplifying losses. Always use stop losses and our carry trade calculator to plan positions.