Which forex platform is suitable for carry trading?

Low leverage platform, all suitable.

Carry trade is one of the most popular fundamental trading methods, and even some large hedges** and other institutions use this method to trade. The basic principle of the carry trade is to buy one currency with a higher ideal interest rate and sell another currency with a lower interest rate, so it is possible to make a profit not only when trading, but also the income from the interest rate difference between the two. Because leverage is used in the foreign exchange market, the amount of currency traded will be relatively large, so sometimes the long-term interest rate spread is also a considerable income.

Carry trades can only be used in normal conditions in the global economy, and are not suitable in times of crisis, when spreads move more frequently and are more risky. In general, carry trades take a long time to execute, and some institutions only trade a few times a year. Since the fundamental analysis determines the long-term trend of the currency, the possibility of trading is more profitable, and there is a double profit.

Therefore, it is very popular with some institutional traders.

Carry trade has its own unique trading method:

1.Choose a currency pair first, the interest rate between the two currencies is quite different, for example, historically AUD JPY, NED JPY, GBP JPY, etc.

2.Depending on the overnight interest rate differential, you should open a long or short position.

3.Analyze the long-term trend of the currency based on fundamentals to determine whether it is suitable to open a preset long or short position.

4.Build an appropriate amount of ** according to the amount of funds, and it is best not to use leverage to avoid risks.

5.There is no stop loss. This is one of the very few forex trades where it is not recommended to set a stop loss.

6.Close a position when a preset target is reached or when there is a change in fundamentals.

Before doing carry trade, you must first understand whether there is a difference between the ** of the platform and the currency sold, if it is all negative interest, then there is no need to do carry trade.

It is generally believed that carry trade refers to a market speculation behavior in which the high-interest currency is sold and the low-interest currency is sold, and the high-interest currency is deposited in the bank of the country in order to earn higher interest than the low-interest currency country. The carry trade begins with the exchange of low-interest currency into high-interest currency, the process and means of depositing high-interest currency with the country's banking and financial institutions, and ends with the re-conversion of high-interest currency into low-interest currency.

There are two ways to carry trade. One is to directly exchange their low-interest currencies into high-interest currencies and deposit them in the country's banking institutions. One is to borrow money from a low-interest currency country, and then exchange the borrowed low-interest currency into a high-interest currency and deposit it in the country's banking institutions.

For example, at the price of USD JPY, you **1 USD, and at the same time, you pay and deposit this 1 USD into a US banking institution, and after a year, the exchange rate of USD JPY rises. At this point, you're ready to end the carry trade.

If the interest rate in the United States is 5% and the interest rate in Japan is zero, then, 1*5%=. And then there's the beautiful dollar. 1 USD can now be exchanged for, can be exchanged for (.

In common. Compared to the previous one (here, the interest you earn is, but the fluctuation of the exchange rate you earn is 10 JPY.

Risk analysis of carry trades.

Trading is risky. Where is the risk of the carry trade, we have just analyzed the two aspects of its profits, in terms of interest, the volatility is not too big, because a country's banks have to consider interest rates or interest rates for a long time, so it has little impact on interest income.

One of the main risks is the exchange rate of high-interest currencies against low-interest currencies. If in the example we just given, if the exchange rate of USD JPY falls to after a year. Then what we can get in the end is (1*, so we compare, we still lose.

Risk control of carry trade.

With the above analysis, you should have a basic understanding of the risks of carry trade. So how can the carry trade be risk-free? Because carry trade is now mainly done by large institutions, and their funds are large, there is a "sell-up arbitrage" and "non-sell-up arbitrage".

The latter is a carry trade in its natural state, which is risky. The former is a high-interest currency Congress will give traders a "forward confluence" according to the development of the currency, and according to the way we just calculated, if this forward confluence can guarantee profits, then the big institutions will carry out. This is one of the ways to avoid risk.

Let's talk about the impact of the opening and settlement of carry trades on the foreign exchange market.

When a carry trade opens a position, because it is a high-interest currency, sell a low-interest currency, then, the high-interest currency will be stronger, and the low-interest currency will be weaker. When the carry trade is settled, because it is selling high-interest currencies and ** low-interest currencies, the high-interest currencies will weaken and the low-interest currencies will strengthen.

What is a carry trade in forex trading? This is the right question, and Huichacha will answer for you:

Carry trade is one of the most popular fundamental trading methods, which refers to a market speculation that sells low-interest currencies and deposits high-interest currencies in the country's banks to earn higher interest rates than those in low-interest currency countries. So, throughout the trading process, the trader may not only make a profit, but also earn income from the middle interest difference.

To put it simply, the carry trade starts with the exchange of low-interest currency for high-interest currency, the process and means of depositing high-interest currency into the country's banking and financial institutions, and ends with the re-exchange of high-interest currency into low-interest currency.

One is to directly exchange their low-interest currencies into high-interest currencies and deposit them in the country's banking institutions.

The second is to borrow money from low-interest currency countries, and then exchange the borrowed low-interest currency into high-interest currency and deposit it in the country's banking institutions.

If the FX carry is to sell the low-interest currency JPY, ** the high-interest currency AUD. This is not called arbitrage, this is called death.

The key to foreign exchange arbitrage is not the interest rate differential, but the fixed exchange rate. Take 10,000 steps back, if the interest rate spread is 3%, the exchange rate must not fluctuate more than 3%.

Therefore, selling low-interest Hong Kong dollars or US dollars, ** high-interest RMB, is a typical foreign exchange arbitrage.

For example, the annualized return of RMB is 4%, and the fluctuation of the RMB exchange rate against the US dollar is basically canceling each other.

However, the arbitrage between two fixed-rate currencies is also a kind of death.

If there are a large number of arbitrageurs in the market, the fixed exchange rate must be broken.

The reason is that in the case of complete capital flows, if a strict fixed exchange rate system is introduced, there is no complete independence of monetary policy.

In the event of a speculative shock, the fixed exchange rate can only passively adjust the domestic interest rate in the short term to maintain the fixed exchange rate, or use foreign exchange reserves to make up for the deficit in the long term, resulting in an increase in external debt. It can be seen that in order to achieve complete capital flow and exchange rate stability, the domestic economy will pay a huge price for abandoning monetary policy.

A typical example: the Thai baht, the Indonesian rupiah, and the ringgit had a fixed exchange rate with the US dollar before the Asian financial crisis, and after the crisis broke out, all **50%.

Therefore, the fixed exchange rate arbitrage is a funnel for drilling the system, and it is also a kind of death. It's not that I didn't report it, the time has not come.

Therefore, the premise of foreign exchange arbitrage is the long-term stability of the value of the two currencies. There are only two ways to do this:

1.Arbitrage between one currency, two forms.

For example, the carry interest rate between the Eurodollar and the US dollar, and the carry interest rate between the People's Bank of China RMB and the offshore RMB.

2.One currency, carry between 2 locations.

In the United States, the cost of borrowing is very low, and after arriving in China, the first dollar wealth management products with higher returns.

3. Arbitrage between black platforms.

As a type of Ponzi **, the vast majority of people like this type the most. It's a pity that as a disciplined person, I won't introduce it.

I'm doing the exchange rate spread right now, and you can do this.

Arbitrage trading is to take advantage of the difference in interest rates between the two places to make profits, which is divided into two types: cover-up arbitrage and non-cover-up arbitrage. For example, if the exchange rate of the currencies of A and B is 1A=, the annual interest rates of B and B are 5% and 10% respectivelyAt this time, 1 million of the currency of country A is borrowed from country A, and 10 million of the currency of country B is exchanged at the spot exchange rate and deposited in the bank of country B.

In this way, after one year, 11 million can be withdrawn from the Bank of Country B and converted into 1.1 million currency of Country A, and 1.05 million can be returned to Bank Bank A to obtain 50,000 currency of Country A. However, the general exchange rate is not constant, there will be changes, so it is uncertain how much the currency of country A is worth 11 million years later, and if the currency of country B is converted back to the currency of country A at the spot exchange rate after one year according to the above operation, it is called non-covering arbitrage. Due to the uncertainty of exchange rate changes, there are risks associated with non-covering arbitrage, and it is possible that it will not only fail to make a profit, but also lose money.

For example, if the exchange rate between A and B becomes 1A = 11B after one year, you can only exchange back 1 million A currencies after one year, so you lose 50,000 A currencies. Cover arbitrage can eliminate the risk of non-cover arbitrage, cover arbitrage is to exchange the currency of country A into the currency of country B at the same time to sign a forward contract with the bank, the general bank will enter into a forward sink according to its expectations, according to the forward sink can be calculated forward **, for example, a bank forward ** is 1a =, then just protect the principal, so if the bank ** 1a is less than, it is a sure profit, if it is greater than, it will lose money, and this transaction will not be done after calculation. Swap Rules In the instant forex market, all trades must be settled within two business days.

An overnight rollover means closing an open position on the current day's value date and opening the same position on the next day's value date after calculating the interest rate difference between the two currencies in question.