The Cost of Carry is one of the most difficult concepts in forex trading to understand. It refers to the amount of money a trader must invest in order to maintain a position. The term carry is used because it represents the amount of money a trader must invest to maintain a position. To gain or lose money in the forex market, a forex trader must be willing to invest or relinquish funds based on changes in the price of their asset. The cost of carry is often referred to as the carrying charge or price of carry. A trader must decide whether to maintain a position based on the current cost of carry.A forex trader must decide whether to sell his currency at current market rates or buy it at current market rates. In short-term trading, this decision is relatively easy since it only involves making decisions daily or weekly. However, as speculators trade in progressively longer time frames, this process becomes more complex and involves more calculations. To make informed decisions, forex traders typically perform analysis that measures several factors such as expected volatility and expected trend direction. This information helps them choose between maintaining a long or short position based on various cost factors such as margin interest rates and time between trades.Costs are measured in percentage terms and may differ from the price of the original transaction. For example, if a $10 billion euro spot trade occurs, both parties will likely agree that there was $10 billion exchanged hands. However, if $10 billion was traded at 1 euro/$1 euro, there would be only $9 billion euros transferred from buyer’s account to seller’s account— $9 billion less 10% ($900 million) taken by banks for providing financing for this trade. Since 10% is not directly related to the price when measuring costs, 10% may be deducted from an asset’s current price before calculating how much would need to be deposited for carrying a position. In other words, after deducting commissions and other pricing factors such as spreads and bid-ask differentials, there may only be enough funds available for investing 10% less than the original price paid for an asset— hence why this concept is sometimes referred to as 10% price of carry (POC). The POC can then be compared with the current selling rate — adjusting selling rates upwards when selling at higher prices will increase profit margins and lowering rates when selling at lower prices will generate additional income from carry income.Carrying charges are not necessarily synonymous with buying prices since many traders also choose not to take positions at all costs — earning no income from any previous investments they have made in their trading account. Although 10% can vary greatly between different assets due their pricing factors mentioned above, it is common for forex traders operating within certain regulatory limits to charge 15–20%. As regulations continue shifting towards more transparency worldwide, this concept will become even more closely monitored by authorities — especially since unregulated financial companies have been associated with several major financial disasters over recent years .
