Carry Trade Calculator
Estimate carry trade profit, interest rate differential, and potential costs for a currency pair.
What Is a Carry Trade Calculator?
A carry trade calculator estimates the potential profit or loss from holding a currency pair overnight. It calculates the interest rate differential between the two currencies in the pair and factors in the position size, leverage, and holding period to project the net carry return. This tool is used by forex traders to evaluate whether a trade generates positive or negative swap points.
How Carry Trade Profit Is Calculated
The core logic behind a carry trade is simple: you borrow a currency with a low interest rate and buy a currency with a higher interest rate. The profit comes from the difference between those rates, adjusted for the size of your position and the number of days you hold the trade.
The general formula used by the calculator is:
Daily Profit = Position Size × (Interest Rate of Base Currency − Interest Rate of Quote Currency) / 365
The result is then multiplied by the number of days the position is held. The calculator also accounts for:
- Position size — the notional value of the trade in units of the base currency.
- Interest rate differential — the difference between the central bank rates or swap rates of the two currencies.
- Holding period — the number of days the trade remains open.
- Leverage — if applicable, leverage affects the margin required but not the carry profit calculation itself.
The calculator assumes no change in exchange rates during the holding period. It isolates the carry component only.
How to Use the Carry Trade Calculator
- Select the currency pair — choose the base and quote currencies you intend to trade.
- Enter the position size — input the number of units of the base currency (e.g., 100,000 for one standard lot).
- Set the interest rates — enter the current interest rates for both currencies. These are typically the central bank rates or the swap rates offered by your broker.
- Specify the holding period — enter the number of days you plan to keep the position open.
- Review the result — the calculator displays the estimated daily and total carry profit or loss.
Example Calculation
Suppose you buy AUD/USD with a position size of 100,000 units. The Australian dollar has an interest rate of 4.35%, and the US dollar has an interest rate of 5.50%. You hold the position for 30 days.
Daily profit = 100,000 × (0.0435 − 0.0550) / 365 = −3.15 USD
Total profit over 30 days = −3.15 × 30 = −94.50 USD
In this example, the carry trade results in a loss because the base currency (AUD) has a lower interest rate than the quote currency (USD). The calculator helps you identify such negative carry scenarios before entering the trade.
Understanding the Results
The output from the calculator shows two key figures:
- Daily carry profit/loss — the amount earned or paid each day the position is held.
- Total carry profit/loss — the cumulative amount over the specified holding period.
A positive result means you are earning interest on the position. A negative result means you are paying interest. The calculator does not account for exchange rate movements, which can significantly impact the overall trade outcome. Carry profit is only one component of total return.
Common Mistakes When Using a Carry Trade Calculator
- Using incorrect interest rates — broker swap rates often differ from central bank rates. Always use the rates your broker applies to overnight positions.
- Ignoring triple swap days — most brokers apply triple swap on Wednesday nights to account for weekend settlement. This can distort daily carry calculations.
- Assuming constant rates — interest rates change over time. A carry trade that looks profitable today may become unprofitable if rates shift.
- Forgetting spread and commission costs — the calculator only estimates carry profit. Entry and exit costs must be factored into the overall trade plan.
Limitations of the Calculator
The carry trade calculator provides an estimate based on static inputs. It does not predict future interest rate changes, exchange rate fluctuations, or broker-specific swap adjustments. The actual carry received may vary due to:
- Differences between broker swap rates and central bank rates.
- Changes in interest rates during the holding period.
- Holiday schedules that affect swap calculations.
- Broker-specific policies on negative or positive swap.
Use the calculator as a planning tool, not a guarantee of returns.
Practical Use Cases
- Evaluating carry trade strategies — compare different currency pairs to find those with the most favorable interest rate differentials.
- Assessing overnight holding costs — determine whether it is worth holding a position overnight based on the carry cost or benefit.
- Comparing brokers — input different swap rates to see how broker policies affect your potential carry profit.
- Planning long-term positions — estimate the cumulative carry return for swing trades or longer-term positions.
FAQ
What is a carry trade in forex?
A carry trade is a strategy where a trader buys a currency with a higher interest rate and sells a currency with a lower interest rate. The goal is to earn the difference between the two rates over time. The profit is collected as daily swap points or rollover interest.
Does the calculator account for leverage?
No. Leverage affects the margin required to open the position, but it does not change the carry profit calculation. The carry profit is based on the full notional position size, not the margin amount.
Why does my broker's swap rate differ from the central bank rate?
Brokers often add a markup to the interbank swap rates. They may also apply different rates for long and short positions. Always use the swap rates provided by your broker for accurate calculations.
Can I lose money on a carry trade even if the exchange rate doesn't move?
Yes. If the interest rate differential is negative, you will pay interest each day you hold the position. Over time, these costs can accumulate and result in a net loss even if the exchange rate remains unchanged.
What is a triple swap day?
Most forex brokers apply triple swap on Wednesday nights to account for the weekend settlement period. This means the carry cost or profit for Wednesday is three times the normal daily amount. The calculator does not automatically adjust for this, so you may need to account for it manually.