Carry Trade Calculator
Calculate profits from forex carry trades by analyzing interest rate differentials and exchange rate movements
Calculate Carry Trade Returns
The total amount you're investing in the carry trade
Exchange rate when the trade begins
Exchange rate when the trade settles
Interest rate of the high-yield currency
Interest rate of the low-yield currency
Number of days from trade initiation to settlement
Carry Trade Results
Calculation Breakdown
Spot Rate Differential: (0 - 0) ÷ 0 = 0.00%
Interest Rate Differential: 0% - 0% = 0.00%
Investment Return: (1 + 0.00% × (1 + 0.00%))^(0/360) - 1
Carry Trade Profit: $0 × 0.000% = $0.00
Risk Analysis
Example: USD/GBP Carry Trade
Trade Setup
Currency Pair: GBP/USD
Strategy: Long USD, Short GBP
Initial Exchange Rate: 0.85
Settle Exchange Rate: 0.83
USD Interest Rate (Lending): 0.75%
GBP Interest Rate (Borrowing): 0.5%
Trade Duration: 180 days
Amount Invested: $1,000
Calculation Results
Spot Rate Differential: (0.83 - 0.85) ÷ 0.85 = -2.35%
Interest Rate Differential: 0.75% - 0.5% = 0.25%
Investment Return: (1 + 0.25% × (1 + (-2.35%)))^(180/360) - 1 = 0.122%
Carry Trade Profit: $1,000 × 0.122% = $1.22
Popular Carry Trade Pairs
Popular currency pairs for carry trade strategies
Carry Trade Risks
Currency risk from exchange rate volatility
Interest rate changes can affect profitability
Currency crash risk in volatile markets
Economic events and policy changes
Understanding Carry Trade Strategy
What is a Carry Trade?
A carry trade is a forex trading strategy where you borrow money in a currency with a low interest rate and invest it in a currency with a higher interest rate. The goal is to profit from the interest rate differential while managing currency risk.
How Carry Trades Work
- •Borrow in low-yield currency (funding currency)
- •Invest in high-yield currency (target currency)
- •Earn the interest rate differential
- •Manage exchange rate risk
Key Formulas
Spot Rate Differential =
(Settle Rate - Initial Rate) ÷ Initial Rate
Investment Return =
(1 + (Lending Rate - Borrowing Rate) × (1 + Spot Differential))^(Days/360) - 1
Carry Trade Profit =
Amount Invested × Investment Return
Important: Carry trades involve significant currency risk. Exchange rate movements can easily eliminate interest gains or create substantial losses.
Market Conditions
Carry trades work best in stable, low-volatility market conditions with clear interest rate differentials.
Risk Management
Use position sizing, stop losses, and currency hedging to manage downside risk in carry trade strategies.
Economic Factors
Monitor central bank policies, economic indicators, and geopolitical events that affect interest rates and exchange rates.