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Chapter 26, Part I. Let's Start with Carry Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 26, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Commander in Pips: Perfect! You’ve really surprised me… So, for those who intend to dive into carry positions, there are two issues are preferable to see:

    - As low volatility as it could be – if rate will not change at all – all the better;

    - As large difference in rate as it possible.

    That is the dream of traders who intend to enter carry trade.

    Pipruit: Well, it looks like to borrow at 5% and to lend at 10% per year, for example. So, your profit will be 5% per year. But, sir, I’m not very fascinated with just 5% or even 10% per year and, second, I like to trade, to analyze charts, indicators, you know. Why we’ve spent so much time with it?​

    Commander in Pips: Well, concerning about 5% annually – this is without leverage. Add here 20 times leverage and you will double your account… But this will only happen if you will use the total value of your account as a margin. Nevertheless, even 50% profit from carry trade is not bad, right?

    Now about the second – don’t be too hasty. We will discuss this topic and how to involve it in day-by-day operations.

    Carry Structure

    Although you’ve explained me this topic pretty well, I think that we can spend some time and make fast repeat of that. Let’s choose some pairs with significant different in rates… What do you offer?

    Pipruit: The highest rate right now among the majors is for the AUD, while for the low rates we can take the JPY or even the USD...​

    Commander in Pips: All right let’s take AUD/USD. AUD rate now is 4.5% while USD rate is 0.25%. Hence, carry rate will be 4.50-0.25 = 4.25% - not bad ha - greater than what you can get on 10 year US Treasuries bonds.
    #1 Sive Morten, Dec 26, 2013
    Lasted edited by : Oct 2, 2016
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