DailyFX Trading Course Walkthrough: Part Two (2026)

1. DailyFX Course: Part Two Overview

The DailyFX forex trading course is a free, comprehensive educational series designed for traders of all levels. Part One covered the basics of trendline analysis and price action. Part Two builds on those foundations by exploring the macroeconomic forces that move currency markets — specifically, interest rates and their influence on currency prices.

This walkthrough is designed to complement the official DailyFX course materials. Whether you are a complete beginner or an experienced trader looking to refine your understanding, this guide will help you grasp the key concepts covered in Part Two of the series.

What you will learn in this guide:

• How interest rates influence currency prices and why they are the primary driver of forex markets
• What rollover (swap) is and how it affects your trading account
• The carry trade strategy — how to profit from interest rate differentials
• How to balance fundamental and technical analysis in your trading

2. How Interest Rates Drive Forex Markets

Interest rates are the single most important driver of currency prices in the forex market. When a central bank raises or lowers interest rates, it has a direct and immediate impact on the value of that country’s currency.

The mechanism behind interest rates and currency prices:

• Higher interest rates typically attract foreign investment, as investors seek higher returns on their capital. This increased demand for the currency causes it to appreciate.
• Lower interest rates typically discourage foreign investment, reducing demand for the currency and causing it to depreciate.
• The interest rate differential — the difference between the interest rates of two countries — is a key factor in determining the relative strength of currency pairs.

Central bank policy and market expectations:

It’s not just the current interest rate that matters — market expectations of future rate changes are equally important. When a central bank signals that it is likely to raise rates (hawkish), the currency often appreciates in advance of the actual hike. Conversely, when a central bank signals that it is likely to cut rates (dovish), the currency often depreciates.

Real-world example: In 2022-2023, the Federal Reserve raised interest rates aggressively to combat inflation, causing the US Dollar to strengthen significantly against most major currencies. This demonstrated the powerful relationship between interest rates and currency prices.

3. Understanding Forex Rollover

Rollover — also known as swap — is the interest payment that is credited or debited to a trader’s account for holding a position overnight. It is a key concept that every forex trader must understand.

How rollover works:

• When you hold a forex position overnight, your broker calculates the interest rate differential between the two currencies in the pair
• If you are long on a currency with a higher interest rate than the one you are shorting, you will receive a positive rollover (interest credited to your account)
• If you are long on a currency with a lower interest rate than the one you are shorting, you will pay a negative rollover (interest debited from your account)
• Rollover is typically calculated at 5:00 PM ET (the end of the trading day) and applied to your account

Why rollover matters:

• Rollover can add to your profits or increase your losses over time
• For long-term traders (swing traders and position traders), rollover can have a significant impact on overall returns
• Understanding rollover helps you make more informed decisions about which positions to hold overnight

4. The Carry Trade Strategy Explained

The carry trade is one of the most popular long-term forex trading strategies. It involves buying a currency with a high interest rate and selling a currency with a low interest rate, profiting from the interest rate differential.

How the carry trade works:

• Step 1: Identify a currency pair with a significant interest rate differential (e.g., AUD/JPY where AUD has high rates and JPY has low rates)
• Step 2: Buy the high-yielding currency (AUD) and sell the low-yielding currency (JPY)
• Step 3: Hold the position to collect the positive rollover (interest) each day
• Step 4: Ideally, the currency pair also appreciates, adding capital gains to your interest income

Historical examples of the carry trade:

• AUD/USD (2009-2011): Australia had high interest rates while the US had near-zero rates, making AUD/USD a popular carry trade
• USD/JPY (2012-2015): The US raised rates while Japan maintained near-zero rates, making USD/JPY a profitable carry trade

The impact of ZIRP and NIRP on carry trades:

The era of Zero Interest Rate Policy (ZIRP) and Negative Interest Rate Policy (NIRP) has significantly reduced carry trade opportunities. When most major central banks keep rates near zero, there is little incentive for investors to engage in carry trades. However, as central banks begin to diverge in their monetary policies, carry trade opportunities are likely to re-emerge.

Risks of the carry trade:

• Currency depreciation: If the high-yielding currency depreciates, it can wipe out the interest gains
• Interest rate changes: If central banks change their policies unexpectedly, carry trades can quickly become unprofitable
• Volatility spikes: During risk-off events, investors often unwind carry trades, causing sharp currency movements

5. Balancing Fundamental and Technical Analysis

Successful forex traders typically use a combination of fundamental and technical analysis. Understanding how to balance these two approaches is essential for developing a robust trading strategy.

Fundamental analysis involves studying economic data, central bank policy, and geopolitical events to determine the intrinsic value of a currency. It helps you understand why a currency should move in a particular direction.

Technical analysis involves studying price action, chart patterns, and technical indicators to identify entry and exit points. It helps you determine when to enter and exit trades.

How to balance both approaches:

• Start with fundamentals: Use fundamental analysis to identify the overall direction of the market (the “big picture”)
• Refine with technicals: Use technical analysis to find optimal entry and exit points within that directional bias
• Monitor both: Keep an eye on economic releases and technical levels simultaneously
• Find your balance: Some traders are more fundamental-focused, others more technical-focused. Find the balance that works for your personality and trading style

6. DailyFX Course Reference Table

Use this reference table to quickly understand key terms and concepts from Part Two of the DailyFX course.

7. Series Navigation: Parts 1–10

The DailyFX forex trading course is a ten-part series designed to take you from beginner to confident trader. Below are links to all parts of the series:

9. Conclusion & Next Steps

Part Two of the DailyFX forex trading course has introduced you to some of the most important concepts in forex trading: interest rates, rollover, and the carry trade. Understanding these concepts is essential for developing a comprehensive trading strategy.

Key takeaways from this guide:

• ✅ Interest rates are the primary driver of currency prices
• ✅ Rollover is the interest payment for holding positions overnight
• ✅ The carry trade involves profiting from interest rate differentials
• ✅ Fundamental and technical analysis are complementary approaches
• ✅ ZIRP and NIRP have reduced carry trade opportunities

What’s next?

In Part Three of the series, we will explore support and resistance — two of the most important concepts in technical analysis. These levels form the foundation of many trading strategies and are essential for identifying entry and exit points.

Continue your trading education — explore the resources below to deepen your understanding of forex trading.