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Investment
Carry Trade
Borrowing money in a low-interest currency and investing it in a high-interest currency to earn the difference.
Carry trades are popular in calm markets but can crash quickly during risk-off periods. The strategy works best when interest rate differences are large and currencies are stable.
It's like borrowing money at 1% interest and lending it out at 5% — you pocket the difference while you sleep.
Real world: Traders borrow Japanese yen (very low interest) and buy Australian dollars (higher interest). They earn the interest rate difference every day. It works great until the yen suddenly strengthens and wipes out the profits.
💡 Carry trades are a classic way to earn steady income in forex — until the market suddenly changes direction.