A carry trade is a position held in a currency pair with a positive interest rate differential, so that the daily swap is credited rather than charged. The credit is small relative to exchange rate movement, and any change in the rate differential or in the spot price can exceed it.
How the rollover amount is calculated
The mechanism is the rollover arithmetic and nothing else. As described under Swap in Forex (FX Swap), the broker publishes a value per lot per night for each direction and applies it at every rollover. On one lot with a quoted credit of 0.30 points and a point value of $1 per lot, thirty nights give 0.30 × 1 × 30 = $9 credited to the account. Those published values are not fixed: they are revised as market rates and the broker's markup change, and a direction that is credited today can be charged later without the position being touched.
The differential is measured against price movement, not on its own
The credit accrues once per night; the exchange rate moves every second. On the same one lot, an adverse move of 60 pips is 60 × $10 = −$600, roughly 67 times the $9 accrued over a month, and a move of that size can occur inside one session. The result of the position is the price change plus the accumulated swap, and in almost any normal week the price change is by far the larger of the two terms.
The differential itself depends on what central banks do next. When the tone of a central bank shifts (see Hawkish vs Dovish), expectations for the rate spread reprice immediately, and the currency that carried the higher rate can fall as that spread narrows. Whether it does, and by how much, is not fixed and is not predictable from the differential. The credit and the price then move against each other at the same moment.
Leverage shortens the time to a close-out
Leverage does not change the arithmetic above; it changes how long the account can absorb it. Under the ESMA retail limits a position of one lot in a major pair, $100,000 notional at 30:1, requires margin of about $3,333. The 60-pip adverse move used above removes −$600, about 18% of that margin, before any accrued swap is taken into account. The retail limits are 30:1 on major currency pairs, 20:1 on non-major pairs, major indices and gold, 10:1 on other commodities and non-major indices, 5:1 on individual equities and 2:1 on cryptocurrencies. Accrued swap gives no protection against a margin close-out: the position is closed on the margin level, which is driven by price.
Size the position first. Margin, notional value and the cost of one pip at a given volume follow from the contract specification: notional value is volume × contract size × price, margin is notional value × margin rate, and one pip is worth volume × contract size × pip size in the quote currency.
Related terms
- Swap in Forex (FX Swap)
- Hawkish vs Dovish
- Quantitative Easing
- Trade Diversification and Risk Management Strategies
Sources
- European Central Bank: Key ECB interest rates
- Federal Reserve: Open market operations: federal funds target rate
- Bank for International Settlements (BIS): BIS Bulletin 90: the market turbulence and carry trade unwind of August 2024
- MQL5 Reference: Symbol properties: base and quote currency, contract size, swaps
