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DailyFX has been my daily fixtures for forex articles. I find this one particularly interesting.

What Will the Dow ‘September Effect’ Do to Carry Trades?

Before we go any further on commenting, let’s add a term to your trading knowledge on Carry Trade.

Definition of Carry Trade from Investopedia,

A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates - which can often be substantial, depending on the amount of leverage the investor chooses to use.

Which simply means that if you know how to do it properly, you can make money from one lower interest rate pair to make out from the higher pair. But there are always risk when you do that. What if the rates of the currency you changed dropped? Uh oh, lost suffered.

This is what exactly most of the carry traders are facing at this point, whilst all eyes are on Yen and Swiss Franc, should the correlation of the Dow Jones and carry trades be  close, we’re expecting a tough month for traders who specialises in carry trade.

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