Thread: 1) Do you have a question on Carry Trading?

Should you have a question about Carry Trading, here is the place where you can ask an instructor. The instructors are available 24 hours per day during worldwide business hours (Sunday afternoon thru Friday afternoon New York time). You will see the instructor's response posted after your question. (If you need help posting a chart, watch this short VIDEO.)

Hi All,

I follow the formation given in Trading Course about the carry trade and I'd like to start with the USD/TRY because of the rate given on sells: 0,69

What do you think about taking a sell position?

Originally Posted by parispecial

Hi All,

I follow the formation given in Trading Course about the carry trade and I'd like to start with the USD/TRY because of the rate given on sells: 0,69

What do you think about taking a sell position?

Yes, as long as you are looking for an entry at a clear resistance line (which it appears you are). It is very important to still use clear technical tools such as simple support and resistance for trade entry and not just enter in the direction of the carry blindly. Nice work.

However, as a general rule, we might look for more traditional carry pairs which are now trending strongly, such as EUR/AUD for example.

Hi,
Please apologise me if this question is extra silly is about roll over, I know that the rates are in the simple dealing rate window. My question is why the rate that show up in that window is not the same that I am charge, for instance at the moment I am short AUD/USD the roll short for this pair says -7.36, but I was charge -0.18.
So I am a bit confused about this numbers.

Thanks

Originally Posted by manzanofab

Hi,
Please apologise me if this question is extra silly is about roll over, I know that the rates are in the simple dealing rate window. My question is why the rate that show up in that window is not the same that I am charge, for instance at the moment I am short AUD/USD the roll short for this pair says -7.36, but I was charge -0.18.
So I am a bit confused about this numbers.

Thanks

Hello manzanofab -

The Rollover showing on the Trading Station as of right now (9:32 PM EST) is for business that closes at 5:00 PM Tomorrow. Positions held as of 5:00 EST tomorrow will accrue/pay the RollS/RollB amounts found on Live Trading Station Accounts as of right now.

The amounts are higher than typical because it is 4 Times Rollover (To account for trade settlement, and the holiday on monday).

You can stay apprised of the rollover calendar and other days in which additional rollover is paid/credited at the following link:

Rollover Calendar

The amount you were charged was for business that closed as of 5:00 PM Today.

This was the amount showing in the RollS/RollB column up until 5:00 PM Today. At 5:00 PM - Rollover is paid/debited.

Then Rollover amounts are set for the next day's business - and correspondingly updated on the platform.

Please feel free to contact Client Services with any additional questions.

Hi there,

I'll simplify my earlier question. Is the interest you earn on carry trades compounding interest?

Thanks,
Matt.

Hi there,

Sorry to nag but I would be grateful if someone could tell me weather the interest you earn on carry trades is compounding interest, and nobody has replied to my previous post.


Thanks,
Matt.

Originally Posted by crocketoo

Hi there,

Sorry to nag but I would be grateful if someone could tell me weather the interest you earn on carry trades is compounding interest, and nobody has replied to my previous post.


Thanks,
Matt.

Great question. Compounding interest assumes you are reinvesting a divident / payment / rollover back into your principle investment. When you trade forex, rollover profits are not added back to your position to trade a greater lot size. This makes rollover by definition a function of simple interest not compounded interest.

......and do you earn interest on the leverage you use? If I was trading $1000 at 1x leverage would I get the same interest as $5 at 200x leverage?
Thanks for all your help,
Matt.

Originally Posted by crocketoo

......and do you earn interest on the leverage you use? If I was trading $1000 at 1x leverage would I get the same interest as $5 at 200x leverage?
Thanks for all your help,
Matt.

Rollover amounts are entirely based on position size. So if you have a 10k trade, you will accrue/pay rollover for that 10k position regardless of the equity in the account or leverage being used.

1. Can retail investors place a carrytrade? simple as just buy the one with high interest rate and sell the one with low?
2. I heard ppl can buy US treasury when they do a carrytrade on USDJPY. Can retail investors do that?
3. Isn't only nonswap-free acct can do carry trade?

Originally Posted by bbmak

1. Can retail investors place a carrytrade? simple as just buy the one with high interest rate and sell the one with low?
2. I heard ppl can buy US treasury when they do a carrytrade on USDJPY. Can retail investors do that?
3. Isn't only nonswap-free acct can do carry trade?

great question bbmak,

Yes your right, anyone can take part in the carry trade. The carry trade finances a lower yielding asset to buy a higher yielding asset. As earning interest and not capital gain is the central goal of the carry trade one would need to take advantage of rollover to benefit. Due to this, carry trading in the FX market requires access to a swap account. If you have further question, I would be glad to help. Please let me know.

Hi there,

Why is it that I do not have to pay interest on the money I borrow as leverage? Im sure the bank would rather invest it else where.

Tanks,
Matt.

Originally Posted by crocketoo

Hi there,

Why is it that I do not have to pay interest on the money I borrow as leverage? Im sure the bank would rather invest it else where.

Tanks,
Matt.

Interest is paid in Forex and is a function of the rollover you see on your platform. Each currency has a borrowing rate (swap) associated with it as set by their reserve bank. This allows you to either earn , or pay interest when trading Forex. For instance look at the AUD/USD Pair. THE AUD carries an interest rate of 4.25% and the USD holds a rate of .25% . If you buy this pair you will earn interest , as you are financing your AUD position buy selling a cheaper USD.

The opposite is also true. If you Sell the AUD/USD you are financing your trade by selling Expenseive (4.25%) Aussie Dollars to hold a cheaper USD (.25%) . In that example you would end up paying rollover for holding the trade.

Leverage comes into play by a sheer multiplier effect. The bigger the position, the more currency you fiance , the great your rollover will be on a daily basis.

Hi,if you don't pay interest on the money you would not buy a leverage,bank will not in this position gave the more lone,they invest to another clients who will pay interest on money.