This article looks at the carry trade on the forex Australia market.
When you trade on the forex Australia market you should consider the use of the carry trade. One of the reasons for this is that the Australian dollar is one of the prime candidates for the carry trade currency pair. You should consider why this is the case and what makes up the carry trade. You should also consider the intricacies that you need to look at with the carry trade and the broker you are using.
What is the Carry Trade?
The first point that you have to consider is what the carry trade is. The carry trade is a passive trading strategy where you do not make a profit from the movements of the currency pair. You are going to make a profit from the different interest rates that the currencies in the pair offer. The ideal currency pair for the carry trade will be one where one currency has a very high interest rate and the other currency has a very low interest rate.
The bigger the difference between the two interest rates the more you are going to make with the carry trade. This is due to the way that rollover interest is calculated. The rollover interest is the way that you are going to make a profit because you are paid for holding the high interest rate currency.
Why is Forex Australia Right for This?
The Australian dollar that more forex Australia traders use is ideal for the carry trade. This is due to the high interest rate that this currency offers. This currency is often paired up with the Japanese yen which offers a consistently low interest rate. There are a number of other currencies that the Australian dollar can be paired up with. However, the profit that you make will not be the same as the one you make with the AUD/JPY pair.
The Intricacies of the Carry Trade
There are a number of intricacies that you have to consider when you look at the carry trade. The first is whether or not this is the right trading strategy for you. There are many traders who are not comfortable with the face that your trade has to be open overnight. However, you have to consider that the term overnight on the forex market does not mean hours. The length of time that the trade has to be open for will be determined by the broker that you are going to use.
This is another intricacy of the carry trade that you need to look at. The broker that you have could state that you need to hold the trade open for a set amount of time. This is to stop traders opening a trade just before the end of day and then closing it soon after the end of day.
You also need to consider when your broker has the end of the day. As the forex market is open all the time during the week there is no actual end of day. The brokers have set times when they close the daily trades and you need to know when this is.