Carry Trade, Do you know that you can make a profit or profit when the price of a currency pair is always in a fixed condition for a long time. If you don’t know it, now you are in the right place.Because we will discuss about what is a carry trade and certainly this can bring us all the benefits.
Well, there is actually a way to get very popular profits that are usually done by financial managers in financial markets. And this method is called the Carry Trade.
So, Carry Trade is an activity to sell trading instruments (money) with low interest rates then use it to buy trading instruments (money) with high interest rates.
So when you are paying a low interest rate on the financial instrument you are selling and at that moment you are getting a higher interest rate on the financial instrument you are buying.
An example is this simple transaction.
You go to a cooperative or bank then borrow money for them as much as 1 million Rupiah with a loan interest of 7% a year.
Then 1 Million Rupiah then you buy corporate bonds with yields of 11% a year.
How much profit can we get from this simple transaction? Yes, our profits are 4% of the 1 million Rupiah.
Even though we only get 4% profit in a year we can change it to 40% a year with what help? Yes, again you are right, that is by using leverage or leverage. Still remember that the things you cannot find in stock or bond trading are the existence of large leverage and leverage terms like this you will only get when running a forex trading business.
Hmmm, that’s like a brief understanding of what Carry Trade is. And if you want to know more about Carry Trade, don’t go anywhere first. Why? because then we will learn how carry trades can be done and cannot be done when running a forex trading business.