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Carry trade — definition & meaning

Profiting from the interest-rate gap between two currencies.

A carry trade aims to earn the interest-rate difference between two currencies by buying the higher-yielding one and funding it with the lower-yielding one.

The daily swap credit is the reward, but the exchange rate can move against you far faster than the interest earns, so carry trades carry real market risk despite the steady interest.

The information on Trding.io is for general information only and is not investment advice. Trading involves a real risk of losing money, and most retail traders lose. Never trade money you cannot afford to lose.

Related terms

Swap (rollover)
Interest paid or earned for holding a leveraged position overnight.
Interest rate
The rate set by central banks that influences currencies and markets.
Forex (FX)
The global market for trading one currency against another.
Leverage
Borrowed exposure that lets you control a large position with a small deposit.
Spread
The gap between the bid and ask price — a built-in cost of trading.
Slippage
The difference between your expected fill price and the actual one.

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