Carry trade is a trading strategy in which you borrow a currency that has a low interest rate, then use that money to buy another currency that pays a higher interest rate. You make money on the difference between the interest rates. Simply speaking you borrow something that has a lower interest rate and hen invest it into something that mints you higher interest rate. This king of trade is usually done for currency trading as explained above. This strategy has generated positive average returns since the 1980s, but only in the past decade has it become popular among individual investors and traders.