how do you construct a carry-adjusted time series for backtest FX?

[mizhael]

how do you construct a carry-adjusted time series for backtest FX?

Suppose you want to have the flexibility of not only doing tick data intraday, but also the position will be last for a few days or even a few months so you need to adjust the data for carry effects.

How to do that? The goal is to construct a carry-adjusted time series to have the flexibility of trading time horizon...

Please shed some lights... thank you!

 

[Rhody Trader]

In theory, you could do that by getting hold of overnight interest rates for the currencies in question. The issue you then would have to deal with is adjust those rates based on the spreads between the borrowing and lending rates your broker would provide you. At best you're only going to be able to approximate the carry, in all likelihood. If you're dealing with short-term positions it won't be much of an issue, but if you're talking months for holding periods then it certainly could be.