Strategy pattern · Carry
A forex carry trade strategy, priced with your broker's real swaps.
The forex carry trade strategy in Super Algo Kit holds high-interest currencies against low-interest ones and collects the rate difference. It is graded B: long documented, but tied to sudden, correlated crashes and to the costs you actually pay. For retail accounts, the kit prices carry with your broker's swap schedule, not interbank rates.
strategy facts
Currency carry: long high-rate currencies, short low-rate currencies
- Family
- Carry: collecting interest-rate differentials
- Markets
- Forex, CFDs and currency futures
- Timeframes
- Daily and weekly data, rebalanced monthly
- Evidence grade
- B: long documented, but tied to crash risk and to the costs you actually pay
- Status
- Literature: described in published work; untested by the kit
- Data needed
- Spot rates with forward points or futures prices, or your broker's swap schedule; spreads and weekend gaps
- Cost trap
- Retail swaps can be far worse than interbank carry; a broker markup can remove the whole differential
From the kit's own card. Not investment advice.
Paper first
Test it before you trade it.
Super Algo Kit runs inside the coding agent you already use. It interviews you, writes the spec with pass marks set first, then builds, backtests and paper-tests. Real money starts only when you type the authorize command.
The plan, step by step
Tick them off as you go.
How does a forex carry trade work?
On average, exchange rates have not moved enough to cancel interest-rate gaps. So a basket long high-yielders and short low-yielders has earned the differential over long periods.
That return is widely read as payment for crash risk. Carry positions tend to lose sharply and together in global risk-off episodes, when funding currencies rally.
Carry trade bot rules in plain words
This is a summary of the card's sketch. Any crash filter is a separate declared trial, not a later fix.
- Universe: liquid pairs at your broker, or currency futures.
- Signal: the rate gap from forward points or futures basis; on spot or CFD accounts, your broker's swaps.
- Portfolio: long the highest-carry currencies, short the lowest, with equal or volatility weights.
- Rebalance monthly and hold in between.
Where carry trades break
Long runs of small gains can end in fast, correlated losses when funding currencies spike. Weekend and holiday gaps jump over stops.
Retail accounts add their own problems. Leverage caps limit position size, margin calls arrive at the worst time, and central bank interventions or capital controls can change the rules overnight.
How Super Algo Kit tests carry before any money
Pass marks are declared first, and every parameter change is logged as a trial and checked out of sample. The backtest prices carry with your broker's swap schedule, including the weekday that charges three days, and a missing swap blocks the run.
Historical risk-off episodes are stressed and the worst month is reported. The deflated Sharpe ratio accounts for negative skew and fat tails, and results are split by volatility regime, where losses are expected to cluster.
Before you rely on it
Where it fails.
- Crashes: long stretches of small gains end in fast, correlated losses.
- Retail swaps can be far worse than interbank carry; a markup can erase the differential.
- Retail leverage caps limit size, and margin calls hit at the worst time.
- Weekend and holiday gaps jump over stops.
- Central bank interventions and capital controls can change the rules overnight.
FAQ
FX carry: questions.
Does the forex carry trade still work?
Super Algo Kit does not promise that it does. The card grades carry B: the effect is long documented, but it is tied to crash risk and depends on the costs you actually pay. The kit's tests check whether your version survives those costs.
Why use my broker's swap rates instead of interest rates?
On a spot or CFD account, the swap your broker charges or pays is the carry you actually get. Retail swaps are often far worse than interbank carry, and a markup can remove the whole differential. Super Algo Kit blocks the backtest when a swap is missing.
What is a carry crash?
A carry crash is a fast, correlated loss across carry positions, usually in a global risk-off episode when funding currencies rally. It can erase a long run of small gains. Super Algo Kit stresses past risk-off episodes and reports the worst month.
Can I add a crash filter to a carry strategy?
Yes, but the card treats a volatility or trend filter as a separate declared trial, not a later fix. Adding one after seeing the crashes fits the past. Super Algo Kit logs it as a trial and judges it out of sample.
Keep reading
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- Lustig, Roussanov and Verdelhan (2011). Common Risk Factors in Currency Markets. Review of Financial Studies.
- Brunnermeier, Nagel and Pedersen (2008). Carry Trades and Currency Crashes. NBER Macroeconomics Annual.
- Koijen, Moskowitz, Pedersen and Vrugt (2018). Carry. Journal of Financial Economics.
Build it with Super Algo Kit.
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Super Algo Kit is development software. It is not investment advice, a signal service or a promise of performance. Trading involves substantial risk, including the loss of all capital you trade with.