The carry trade strategy differs significantly from other forex trading approaches, such as scalping, day trading, or trend following, focusing on interest rate differentials rather than short-term price movements. In a carry trade, investors borrow or sell a low-yielding currency (funding currency) and invest in a high-yielding currency (target currency), profiting from the interest rate spread between the two. This strategy is inherently long-term, relying on holding positions for weeks, months, or even years to accumulate interest income.

Unlike scalping or day trading, which aim to capitalize on intraday price fluctuations, the carry trade prioritizes steady returns from interest differentials, making it less dependent on market timing. However, it is sensitive to exchange rate movements, as unfavourable currency fluctuations can erode profits. In contrast, trend-following strategies focus on identifying and riding market trends, regardless of interest rates.

Risk management in carry trades involves monitoring global economic conditions, central bank policies, and geopolitical events that could impact currency values. While carry trades can yield consistent returns in stable markets, they are vulnerable to sudden shifts in risk sentiment or interest rate changes, distinguishing them from more speculative or technical trading approaches. Overall, the carry trade is a unique strategy that blends income generation with currency exposure.