Question: What is Carry Trading?
Answer: Carry trading is when you take advantage of the interest rate differential between two currencies.
For example, if the interest rate on the British Pound(GBP) is 5.75% and the interest rate on the US Dollar(USD) is 4.25% and you place a buy trade on GBP/USD, you will collect the difference between the two interest rates or 1.50%. As long as you hold that trade open, you will be paid that interest differential every day.
For example, if the interest rate on the British Pound(GBP) is 5.75% and the interest rate on the US Dollar(USD) is 4.25% and you place a buy trade on GBP/USD, you will collect the difference between the two interest rates or 1.50%. As long as you hold that trade open, you will be paid that interest differential every day.
