A Breakdown of the Forex Singapore Carry Trade

Posted by admin 13/02/2014 Comments are off 1430 views

Forex Singapore Carry Trade

This article looks at the breakdown of the carry trade on the forex Singapore market.

There are a lot of different ways that you can trade on the forex Singapore market.  One of these ways is through the use of the carry trade.  The carry trade is a strategy that works differently to the other strategies that you can use.  It is important that you understand how this trading differs and what you should do to trade with it. You should also look into the ways that you can combine this trading with other forms of forex Singapore trading.

The Difference between Carry Trading and Other Trading

The primary difference that you find with carry trading and other forms of forex Singapore trading is how you determine what to trade.  With most trading strategies you are going to be looking at the movements in the market.  When you determine that the market movements are in your favour you will be able to trade accordingly.

The carry trade does not look at the market movements to determine when and what you should be trading.  With this trading you will always hold the trade overnight.  The trading that you are going to do is based on the interest rates of the currency pair.  To complete the carry trade you will need to hold the high interest rate currency overnight to earn rollover interest.  The rollover interest that you earn will be based on the difference between the two interest rates that you are trading with.

Completing the Carry Trade

To complete the carry trade you will need to look at the currency pair that you are going to use.  If you are using the carry trade on its own then you can choose any currency pair.  Of course, the currency pair will need one currency with a very high interest rate and another with a very low interest rate.  One of the best currency pairs for this type of trading is the Australian dollar and the Japanese yen.  If you are going to be combining your trading then you will have to look at other currency pairs.

To trade with the carry trade you need to hold the high interest rate currency and sell the low interest rate currency.  If you do not do this correctly you will actually make a loss with the carry trade.  If you are holding the low interest rate currency then the rollover interest is going to be taken from your trading account and not added to it.

Combining Your Trading with Carry Trading

If you complete medium or long-term trading you will be able to combine the trading with the carry trade.  To do this you will complete your analysis of the trade as normal.  However, you are going to complete the trade in such a way that you are holding the currency with the higher interest rate.  Most currency pairs will have a difference in interest rates.  You should always ensure that you are holding the high interest rate to make an additional profit.  There are some traders who will look at the long-term trading of the AUD/JPY pair, but this is not something you have to do.

 

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