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In trading and investment, ‘carry’ refers to the cost of maintaining a financial position over time. This cost is typically associated with interest rates. When an investor holds a position in an instrument with a higher interest rate than the one that they borrowed to purchase it, they incur a carrying cost. This cost can be positive or negative, depending on whether the investor is earning or paying interest on the position.
Carry can also refer to the profit or loss from a hedged position, in which an investor takes opposite positions (long and short) in two different financial instruments with the goal of generating profit from the difference in their interest rates or yields.
For example, an investor borrows money at a lower interest rate in a currency with a lower yield. They invest that money in a higher-yielding currency. They can then earn the difference between the interest rates, which is known as the carry. In forex trading, this strategy is called the carry trade.
The main benefit of the carry trade is the investor’s potential to earn a profit from the interest rate differential between two currencies. The carry trade can also provide diversification benefits in both short and long-term investments.
However, the carry trade can be risky. Changes in interest rates can lead to large market movements in the forex market, resulting significant losses for investors. Therefore, it is essential that investors closely monitor interest rate differentials and market conditions before opening a carry trade.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
