Trade Interest Rate Differentials (Part 3)
For example, take a look at the nice uptrend on AUD/JPY. If
you had a long position on this pair, you would’ve made a hefty profit.
On top of that, the interest rate differential between AUD and
JPY was huge. From 2002 to 2007, the
Reserve Bank of Australia had raised rates
to 6.25% while the BOJ kept their rates at 0%.
That means you made profits off your long position AND the
interest rate differential on that trade!
Now that’d be an awesome cash cow right there!
Later on in college (if your brain hasn’t exploded with all
this forex knowledge by then), we’ll teach you more about carry trade. We’ll
teach you which ones will work and which ones won’t. We’ll even teach you about
a lil’ something called risk aversion. But that’s for a later lesson.
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