Perfect example of carry trade Sep.20/07
Forexmentor.com Forex Trading Price Action
A ‘Yen’ for the ‘Carry Trade’: The Carry Trade is a popular currency trading strategy used in the forex, in that it guarantees carry traders a return on their medium and longer term positions, if they are handled properly. In this type of trade, traders buy currencies with high interest rates, and sell those with lower ones. Accordingly, they are assured that the posting of each trading day’s net-positive rollover interest will accrue to their accounts. In this way, the carry traders benefit not only from profit dollars, but also from interest payments, thereby enhancing their returns significantly.
Here is an example of where the carry trade currency trading strategy worked beautifully: The GBP/JPY pair steadily increased 2001 through 2007 due, in part, to carry traders going long to obtain the interest rate differential. Carry traders who took advantage of the interest rate differential in the GBP/JPY pair made tidy profits by buying the GBP/JPY, and holding on as position trades for lengthy periods of time. They realized their profits in dollars, and from the interest differential between GBP and JPY central bank rates – 5.75% and 0.25% respectfully, at the time of this writing (Sep. 19/07) – a double whammy. Just one of the many currency trading strategies you will find at www.forexmentor.com.
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