This is done to profit from interest receipt and possibly the capital appreciation in such pairs as investors flock to such trades.

Most brokers calculate and pay interests daily with a cutoff time at 5pm New York time. An example is FXCM. The second type of brokers pays interests by the day or even by the seconds. An example is Oanda. As you can see above there is a spread for interest rate payment or receipt.

For example, FXCM pays you 0. But it provides a good guide.

Wednesday AUD/JPY Strategy — Forex Trading Strategy

FXCM has a weird way of calculating required margin but we shall just follow them to calculate our return in this case. So our interest return is actually only 1.

aud jpy forex strategy – FOREX GDP

However, with leverage, you are required to come up with only 2, USD for this, giving you a What that means is you may need to put aside about 15, USD to weather most or all possible drawdowns and keep your position open. So add that to the 2, USD margin and you will only be getting a 8.

And with that, comes the carry trade cycle and unwinding. Not just retail forex traders, but ordinary currency and foreign deposits investors, hedge funds and banks are also after the interest return. So in the larger financial landscape, money is indeed flowing from low interest currencies to high interest ones using forex robot works like bonds and treasury bills.

Therefore, there is actually a long bias to such carry yielding pairs and there is a trend most of the time. As more and more money bet in the same direction, there is often fallout.

Wednesday AUD/JPY Strategy — Forex Trading Strategy

Simply put, there will always come a point where there are no longer enough money to keep the trade afloat and traders start to cash out. As a result, margin calls and stops are triggered and you see everyone trying to homes for sale in stockton ca 95209 out at the same time and price crash big time.

It has happened before and it will happen again. Rate decisions are announced almost monthly and it can change over the year. I have collated some data to see how a buy and hold strategy would likely perform over the year.

Looking at the above data, interest income is insignificant compared to the gyrations in exchange rate which has much more impact on your profitability.

For example, we will aud jpy forex strategy at the start ofbuying AUDJPY at At the end ofafter 6 years, the price closed at You would have gained about In the meantime, you would have endured an incredible Assuming we invested USD forecast forex binary options brokers the margin requirements and a further USD to survive the max how to make money on stock market gta online period.

Our effective leverage will be in the region of about 2 times only. This does not look like an attractive return for me as we would have to endure tremendous risk. Forex carry trade may not be as good a strategy for retail traders but you can still make some profits out of this knowledge.

Even though you may not be able to benefit directly from the interest income, you already know there is a long bias on currencies that pays better. Often times, a trend will develop. Just be sure you have your stop loss in and plan in advance, when, how and where you will exit your positions. Home Forex Trading Strategies Forex Trading Articles Forex trading hours The FTSg Team Privacy Policy.

Currently, AUD interest rate is 2. Now, there are a couple of problems with carry trading for the retail investors. Interest rate spread Most brokers calculate and pay interests daily with a cutoff time at 5pm New York time. Carry trade cycle and unwinding Not just retail forex traders, but ordinary currency and foreign deposits investors, hedge funds and banks are also after the interest return. How AUDJPY carry trade performed Rate decisions are announced almost monthly and it can change over the year.

Conclusion Forex carry trade may not be as good a strategy for retail traders but you can still make some profits out of this knowledge.