A carry trade is paying interest. What would make you close it early?

A carry trade earns the difference between two interest rates, but the currency move can outweigh that income. Carry trade explained sets out how the rate gap, the swap and the exchange rate work together, so the income side is clear before you look at the price. A carry position is only as good as the exit rule you set for it, and the rule has to cover the currency as well as the interest.

Members who hold carry positions usually have a rule for when the trade stops being worth holding, and it is often not the interest rate alone. The rate gap can narrow with a single central bank decision, and the currency can move against the position faster than the income builds. How to build a carry trade explains the mechanics, if you want to compare your rules with the basics.

We would like to hear your exit rule:

• What single event would make you close a carry trade early?
• Do you track the rate gap, the currency move or the swap, and which matters most to you?
• How do you judge whether a central bank decision has changed the gap for good?
• What is the largest loss you have accepted on a carry position, and why?

Please share your own approach and reasoning, not calls for others to copy. Posts that promise a direction or sell signals will be removed.