Carry trade is the kind of Forex trading where low-yielding currency is sold for the high-yielding one and the produced difference between the yields is gained by the trader; usually it’s also multiplied by the margin leverage. So what are the yields of the currencies? Each currency has an overnight interest rate associated with it. If you trade via a broker you buy and sell currencies without a physical delivery, so when you buy a currency you should get paid an interest from a broker, because he gets to «store» and «use» that currency, while you hold the position. If you sell a currency you should pay an interest because you «hold» and «use» the currency you sold, while the position is open. Because in Forex you trade the currencies in pairs you will get the difference between the long currency’s interest rate and the short currency’s interest rate. If you sell GBP/JPY pair and Bank of England’s interest rate is 5.00%, while Bank of Japan’s is 0.50% you’ll lose 4.50% interest on this position, if you buy this pair you gain this difference. In reality, brokers apply some commission to these differences, so you’ll lose more on negative interest and earn less on positive.

These rate differences wouldn’t be so attractive if it wasn’t high leverage that multiplies the gain by tens and hundreds. With 1:100 leverage you get 450%/year holding a long GBP/JPY position. With a higher leverage and a higher rate difference the results are even more impressive. South African rand has 12.0% interest rate associated with it. Buying ZAR/JPY with 1:400 leverage would yield 4600% a year.

No surprise that from 2001 to mid-2007 Forex carry trades were extremely popular. Such currency pairs as GBP/JPY, EUR/JPY, AUD/JPY and NZD/JPY brought thousands percents of profit through the interest rate difference only; considering that those pairs also rose tremendously during that period, such positions made many people rich.

So what happened in 2007 and why carry trade positions aren’t very popular now? Global economy crisis spurred by mortgage lending crisis in U.S. triggered the growth of the global volatility. Central banks stopped raising interest rates and started to focus on growth, while high-yielding currencies started a correction. Higher yields are always associated with the higher risks, so when the global risks increased, the carry traders started to close their positions and spurred a wave of decline on those currency pairs. Currently all those popular carry trade pairs are moving sideways with a little downward slope.

Carry trades didn’t vanish from the Forex market they just became much less popular and no longer last for years. Now carry traders prefer to buy at the local bottoms and hold the pair for weeks or even days to gain their interest rate difference. And this situation will probably last while the global economic growth remains in danger.

This has by far been my best trading week...I might have made more in the past but it was admittedly just hit and miss combined with patience. This last week I've been following technical indicators and doing more than just hope for the best at Bollinger boundaries.Sunday PM through Monday PM -- NAV +3.05%Tuesday AM through Tuesday PM -- NAV +2.93%Wednesday AM through Wednesday PM -- NAV +8.2%

As a long-standing supporter and practitioner of the long-term Forex trading it's hard for me judge this style of trading objectively, but pointing out the advantages is an easy task in this case. Apart from the obvious subjective advantages that are appealing to the certain features of the trader's character, long-term Forex trading has some features that are good for everyone:

1. Spread economy. If you trade on the long-term periods you tend to get more than 100-200 pips from every position, if you trade on the short-term periods your trades will rarely go beyond 50 pips in profit. Assume a broker with 2 pips spread and you make 2,000 pips a month with it (more optimism!). With 10 profitable trades yielding 200 pips each you get 2,000 pips of profit minus 20 pips paid in spread to your broker — that's 1 percent. With 100 trades yielding 20 pips each you get 2,000 pips minus 200 pips left to broker in spreads — that's 10 percent.
2. Resistance to the short-term volatility. Long-term Forex traders don't have to worry about stop-hunting or the intraday spikes. Their positions are safe from the usual daily market volatility. If you trade long-term you always have enough time to change your position's parameters when something important happens.
3. Long-term trading is simple. To trade successfully on the long time periods you have to forecast the general trend and the possible exit points and on the long-term charts that's not a difficult thing to do usually. And since you trade rarely you won't need to make the decisions too often, while in short-term trading you have to develop the complex strategies to succeed.

I can't make you switch to the long-term Forex trading if you don't like it and the majority of the traders enjoy the short-term trading, but now at least you know the advantages of the other trading style. If you experience difficulties trading inside the day you could always switch to the long-term trading.

Believe it or not I'm not enthused about today's earnings.They just didn't seem to be coming naturally. I don't know how to explain it. The markets have been ranging for the last couple of days so maybe that is what's wrong. I actually closed all open trades a few times today -- just so that I could get out of the market and not be exposed to any risk.Maybe I'm just tired?Anyway, I expect

Like the title said, today was a great day!A short morning session yielded two or three percent. The rest of the day went very slowly, but I was able to wrestle pips out of the market again and again.Basically, I'm watching charts very closely, looking for setups. I've got some work to do to improve my timing, but in general I seem to have a good collection of indicators that keep me from

Things are still going very well, but I have to admit I haven't been able to pick off huge gains this week. Not yet anyway.Here's the scoop...Sunday PM through Monday PM -- NAV +3.05%Tuesday AM though Tuesday PM -- NAV +2.93%This is okay, but I see large profits left on the table. It's strange, in order to make it easier to pick up pips I'm working on the 1M and 5M charts. This is pretty good

Trading on the short-term periods at the Forex market is often considered a more popular practice than the long-term trading. In short-term trades your positions usually don't last longer than a day, while in the long-term trading they can remain open for years. Although, I prefer to trade on the long-term charts and hold my positions open for the long periods of time, the short-term Forex trading has its advantages:

1. You can trade on thousands of opportunities when the currency rates change with a high volatility. You can capture every swing — up or down, trade inside the ranges and channels. Even the sideways market can be traded in short-term. When you trade long-term you miss these opportunities.
2. You don't have to tie up your funds for the long periods of time. Your margin capital is locked only for the short periods and you can even get it out of the trading account if you really need it and then put it back and continue trading without any problems. In long-term trading your money gets caught into positions for months.
3. The majority of the Forex trading signals work only for the short-term trading. Usually both technical and fundamental signals are played out in several hours of trading on the Forex market. The number of signals and events that influence currency rates on the long-term scale is really minimal.

This is what you get if you like to trade inside the day and use such techniques as breakout trading, scalping, news trading, range trading and any other short-term strategy. Of course there are also some disadvantages in the short-term trading, but they are not the topic of this post.