About this calculator
This calculator is for education only and does not constitute investment advice. A carry trade earns the gap between two interest rates — but it earns that gap on borrowed money, so the exchange rate applies to the leveraged amount, not to your capital alone. That is the whole risk of the trade in one sentence.
Past returns do not guarantee future results. With leverage, losses can exceed your capital: if the target currency falls far enough, the currency loss on the notional is larger than your capital plus the interest earned, and you owe more than you put in. The break-even move below is the single most important number on this page — it is the adverse move that reduces the whole trade to zero.
How to use it
- Enter your own capital and the leverage applied to it.
- Enter the funding rate you pay and the target rate you earn, plus the holding period in months.
- Enter the exchange-rate move you want to test — positive if the target currency rises, negative if it falls.
- Read the interest gain and the currency gain separately, then the total return and the break-even move. Scan the table for what a 5% or 10% adverse move does.
The formula
Both legs scale with the notional, so leverage multiplies the interest gain and the currency loss equally — 5× leverage turns a 2% adverse move into a 10% hit on capital before interest. The break-even move depends only on the differential and the holding period, not on leverage: a 5-point differential held for 12 months breaks even at a 5% adverse move, whatever the leverage. The model ignores bid-ask spreads, borrowing fees, margin calls and taxes, all of which make the real result worse; in a fast move a margin call can close the position before the holding period ends.
Worked example
$10,000 capital at 5× leverage gives a $50,000 notional. Borrowing at 0.5% and earning 5.5% is a 5-point differential, so 12 months of carry pays $2,500. If the target currency falls 2%, the currency leg loses $1,000, leaving a $1,500 total return — 15.00% on capital — and the break-even move is −5.00%: at a 5% fall the table shows exactly $0. The same trade at a 10% fall loses $5,000 on the currency leg and $2,500 overall (−25.00% on capital). At 10× leverage a 20% fall would lose $20,000 on the currency leg against $5,000 of carry — a $15,000 loss on $10,000 of capital, 150.00% lost, more than was put in.
Sources: Interest gain = capital × leverage × (target rate − funding rate) × months / 12; currency gain = capital × leverage × exchange-rate move. Rates and the exchange-rate move are user-entered; no live rates are fetched. Borrowing costs, spreads and taxes are excluded. Last updated: October 2026.
Frequently asked questions
Why is the break-even move independent of leverage?
Because both legs scale with the notional: doubling leverage doubles the interest gain and doubles the currency loss, so the move that makes them cancel is unchanged. Leverage changes how big the win or loss is, not where zero sits.
Can I really lose more than my capital?
Yes. The currency loss applies to the leveraged notional. At 10× leverage a 20% adverse move is a 200% loss on capital before interest — the position owes more than was deposited unless a margin call or stop closes it first. This calculator shows the un-margined arithmetic; real brokers liquidate, usually at a bad price.
Is the interest differential guaranteed?
No. Rates are user-entered assumptions, not live quotes, and central banks can cut the target rate or raise the funding rate mid-trade. A narrowing differential shrinks the carry and moves the break-even point toward zero.
What is left out?
Bid-ask spreads on both legs, borrowing and rollover fees, margin-call liquidation, and taxes. Carry trades also carry crash risk: the target currency often falls fastest exactly when funding markets stress, so the worst currency move and the worst funding conditions tend to arrive together.
What formula does this carry trade calculator use?
Notional = capital × leverage; interest gain = notional × (target rate − funding rate) × months / 12; currency gain = notional × exchange-rate move; total return = interest gain + currency gain; break-even move = −(target rate − funding rate) × months / 12 Both legs scale with the notional, so leverage multiplies the interest gain and the currency loss equally — 5× leverage turns a 2% adverse move into a 10% hit on capital before interest. The break-even move depends only on the differential and the holding period, not on leverage: a 5-point differential held for 12 months breaks even at a 5% adverse move, whatever the leverage. The model ignores bid-ask spreads, borrowing fees, margin calls and taxes, all of which make the real result worse; in a fast move a margin call can close the position before the holding period ends. The worked example on this page applies the formula step by step with real numbers, so you can verify the result by hand.