Posted by forex at 7:35 AM
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1. Visit a website, such as Easy-forex.com, that shows current interest rates for major worldwide currencies. This information is necessary to open a speculative carry trade in the Forex market, and interest rate information is not always shown inside Forex trading platforms.
2. Select two currencies that offer considerably different interest rates. The potential profit from the carry trade increases with larger interest rate differentials.
3. Buy a currency pair that reflects the two currencies you selected. The first currency of the pair should have a higher interest rate than the second currency, since the Forex account is technically buying the first and selling the second. Thus, you might buy 'AUD/USD' if the Australian dollar has a higher interest rate than the U.S. dollar. You have now opened the carry trade.
4. Monitor your Forex account daily to see the interest added to your account. This will usually be a small cash deposit, and the amount varies, depending on the interest rates involved and the size of your position.
5. Sell the currency pair if exchange rates move against your position, as this will undoubtedly cause significant losses in your account, regardless of the interest rate difference.