Carry Trade Criteria and Risks
Carry Trade criteria are very easy to find because you only need to look for a currency pair that is able to give a high difference in interest rates and then look for a stable or in an uptrend against the currency pair.
For example, we take the AUD / JPY currency pair from 2009 to 2010 which continues to move upwards (uptrend) around 3250 PIPS. When you open a BUY AUD / JPY position in that period, you will not only benefit from the difference between SELL and BUY value, but you will get a carry trade value of + 4.5%.
The risk of Carry Trade , investment or trading must have a risk as well as the carry trade name. We have already discussed a number of possibilities when you will implement this strategy, one of which is the loss experienced by George when the predicted currency pair will rise but in fact moves opposite to the margin call so that the remaining capital is $ 1000 and loses $ 9,000 .
To overcome the losses that we can do, only reduce or limit it by applying cut loss or stop losses to trading positions. So that the $ 9,000 loss suffered by Joko can be reduced, for example, only $ 1,000 by applying stop loss.
Because we must always apply risk management to all kinds of trading positions. This must be done because in the forex market there is no certainty and certainty in the forex market is uncertainty itself.