Carry Trade Scanner: Rank Forex Pairs by Interest Rate Differential

What is a carry trade scanner?

A carry trade profits from the interest rate gap between two currencies. You go long the higher-yielding currency and short the lower-yielding one, collecting the daily swap (rollover interest) for holding the position overnight. A carry trade scanner automates the search for these opportunities: it pulls each currency's central bank policy rate, computes the differential for every tradable pair, and ranks them so the strongest carries surface first.

This tool scans every major, minor, and exotic pair in its dataset. For each pair it shows the base and quote policy rates, the differential, the carry direction, an estimated daily swap per standard lot, the annual carry percentage, and a risk-adjusted score. It also includes a portfolio builder so you can combine several carry positions and see net currency exposure and a diversification score.

How do you use the carry trade scanner?

1. Review the Rankings table. Pairs are sorted by carry strength by default, with the largest differentials at the top.
2. Use the Filter buttons to narrow the list to All, Major, Minor, Exotic, or High Carry (pairs with an absolute differential of 2% or more).
3. Use the Sort buttons to order by Carry (absolute differential), Risk-Adj (carry per unit of assumed volatility), or Pair (alphabetical).
4. Set your Account size (default $10,000). This drives the suggested 1%-risk position sizing shown in the detail panel.
5. Click any row to open its detail panel: central bank context, suggested lot size, daily and annual carry, and a rate-trend risk note.
6. Click + Add to drop a pair into the Portfolio Builder, adjust lots, and read the combined daily carry, annual percentage of account, currency exposure, and diversification score.

The colored bar on each row flags carry strength: strong (differential ≥ 5%), moderate (≥ 2%), low (≥ 0.5%), or neutral (below 0.5%).

How is the carry and swap calculated?

For each pair the tool reads the base and quote central bank rates, then computes:

• Differential = base rate − quote rate. If positive, the carry direction is long; if negative, it is short. Ranking and the annual carry percentage use the absolute value.
• Daily swap per standard lot = (absolute differential ÷ 365) × contract size ÷ 100. With a 100,000-unit contract, that is about $2.74 per day for every 1% of differential.
• Annual carry % = the absolute differential itself (the yearly interest spread on notional).
• Risk-Adjusted score = annual carry % ÷ estimated volatility, where volatility is a fixed proxy by category: 8 for majors, 10 for minors, 18 for exotics.

Rates load from a central bank rates file. Currencies not in that file use built-in fallback estimates (for example TRY 42.50%, ZAR 7.75%, MXN 10.50%). Several high-risk currencies carry an explicit warning (TRY and BRL are flagged extreme/high risk) because their currency risk can dwarf the interest income.

How does the position sizing and portfolio builder work?

The detail panel suggests a position that risks 1% of your account. It assumes a stop distance of (estimated volatility × 10) pips and a pip value of pip size × contract size, then sizes lots as risk amount ÷ (stop pips × pip value), with a 0.01 lot minimum. Because the volatility proxy is large, suggested lots are deliberately conservative.

The Portfolio Builder adds pairs at a default 0.10 lots each. It sums the daily carry across positions, multiplies by 365 for the annual figure, and expresses it as a percentage of your account. It nets long and short lots per currency to show currency exposure, then scores diversification as the number of distinct currencies used × 15, capped at 100. Concentrated bets on one or two currencies score low; spreading across more currencies raises the score.

Worked example: AUD/JPY carry on a $10,000 account

AUD/JPY is a classic carry pair. With AUD at 3.85% and JPY at 0.50%:

• Differential = 3.85 − 0.50 = +3.35%, so the carry direction is long (buy AUD, sell JPY).
• Daily swap per lot = (3.35 ÷ 365) × 100,000 ÷ 100 = $9.2 per standard lot per day.
• Annual carry % = 3.35%.
• Risk-Adjusted = 3.35 ÷ 10 (minor volatility proxy) = 0.34.

In the detail panel with a $10,000 account, 1% risk = $100. Stop = 10 × 10 = 100 pips; pip value = 0.01 × 100,000 = $1,000. Suggested lots = 100 ÷ (100 × 1,000) = 0.001, raised to the 0.01 minimum. That gives a daily carry of about $0.1 and an annual carry of roughly $34, about 0.3% of the account. Adding AUD/JPY to the portfolio at the default 0.10 lots instead yields about $0.9 daily, $335 annually, or 3.4% of a $10,000 account.

Frequently Asked Questions

• How is the daily swap on a carry trade estimated?

  The scanner estimates daily swap per standard lot as (absolute interest rate differential ÷ 365) × contract size ÷ 100. For a 100,000-unit lot that works out to roughly $2.74 per day for each 1% of differential. It is an estimate from central bank rates only and excludes broker markups, liquidity premiums, and funding costs, so your broker's actual swap will differ.

• What does the Risk-Adjusted score mean?

  The Risk-Adjusted score divides a pair's annual carry percentage by an assumed volatility proxy based on its category: 8% for majors, 10% for minors, and 18% for exotics. A higher score means more carry per unit of expected risk. It lets you compare a high-yielding but volatile exotic against a steadier major on a roughly like-for-like basis rather than by raw yield alone.

• Which currency should I go long for a positive carry?

  Go long the currency with the higher central bank policy rate and short the one with the lower rate. The scanner computes base rate minus quote rate: if that differential is positive it labels the pair long for carry, if negative it labels it short. The direction shown already reflects which side collects positive rollover interest on that pair.

• Why are the scanner's swap rates different from my broker's?

  The tool derives swaps purely from central bank interest rate differentials. Real broker swaps add markups, liquidity and funding premiums, and tom-next adjustments, and they differ between long and short sides. The page states this explicitly and advises verifying with your broker. Treat the scanner's figures as a ranking and planning estimate, not the exact credit or debit you will receive.

• What is the diversification score in the portfolio builder?

  The portfolio builder counts the distinct currencies your positions touch (after netting long and short lots) and scores diversification as that count × 15, capped at 100. A single pair touches two currencies for a score of 30; spreading across more currencies raises the score. It is a rough prompt to avoid concentrating an entire carry book in one or two currencies.

• Are carry trades risky?

  Yes. Carry trades earn steady small interest but face sudden, violent reversals during risk-off events, sometimes called picking up pennies in front of a steamroller. Currency moves can erase years of carry in days, as in the 2008 yen unwind. High-yield exotics like the Turkish lira are flagged extreme risk because depreciation can far exceed the interest collected.

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