Maybe you’ve heard of the carry trade as it has been getting a lot media attention in the wake of 2008 financial crisis. This a forex trading strategy that has been around for over two decades and is typically used by the pros, but even novice and intermediate traders would do well to learn about the carry trade.

Unfortunately, many traders just hear the term carry trade and they become intimidated, thinking this is something best left to the pros at the big banks and hedge funds. Well we’re hear to tell you different and show you that it is possible to even program your forex robot to automatically place carry trades for you.

What Is A Carry Trade?

Even if you only been trading forex for a short amount of time, you’re probably keenly aware of the importance of interest rates in the market. When we say interest rates, we’re talking about the rates set by the central banks of countries all over the globe, but only the interest rates of the world’s major economies are worth following for the purposes of forex trading. Most countries have two interest rates. One is the rate that banks pay to borrow money from the home central bank. The other rate is the rate banks charge to lend money to each other and other borrowers.

Conventional wisdom holds that when a country’s interest rates are high, its currency appreciates in value and when a central bank lowers interest rates, more often than not, the currency will decline in value.

So now that we know the basics of interest rates, how do we apply them to a carry trade? The neat thing about a carry trade is that we don’t the pair we’re trading to move a lot to make money on the trade, so we can program our forex robots to use some conservative stop-loss orders and still make a profitable trade. Why is this the case? Given that a carry trade exploits discrepancies in the interest rates of two currencies, the trade acts as a high-yielding savings account, allowing us to collect interest on a daily basis even if the pair doesn’t move much. Sounds like a pretty good deal, huh?

Programming Your Forex Robot To Take Carry Trades

To program your forex robot to take carry trades automatically, you need to know what pairs are best to carry trade with. Traditionally, the yen is part of most carry trades because Japan has had artificially low interest rates for decades. Knowing this, traders will use yen to buy higher yielding currencies like the Australian and New Zealand dollars, so if you want to carry trade, the two main pairs to do so with are JPY/AUD and JPY/NZD.

Other pairs that are used for carry trades include GBP/JPY and GBP/CHF. It is possible to program your forex robot to take carry trades for, just make sure you’re having your forex robot use one currency with a low interest rate to buy another currency with a high interest rate.

Author Bio: Francisco Pizarro G. made a career from Forex and left my profession as a Translator almost 4 years ago; since then I work from home in my small office trading the Asiatic markets during night time, where I found a good niche. I am a fan of Forex Robots

Category: Finances
Keywords: Forex Robots, Day Trading, Forex, Forex Brokers, Finacial Advisors, Expert Advisors