In simple terms, carry on a currency pair is essentially the difference between their respective overnight interest rates, plus or minus a basis (let's assume 0 for simplicity). When an FX trade is done, for example long USD/JPY spot, both legs of the trade will settle T+2 (2 biz days from trade date). Meaning that one will take delivery of USD and simultaneously transfer JPY to the counterparty, two days after the trade is done. This works well if you have a USD bank account for receiving the USD, and a JPY bank account with enough yen to send to your counterparty. However, the vast majority of FX market participants do not have such accounts. This long USD/JPY spot position thus needs to be "rolled over" so that it does not settle (ie. no actual transfer of funds occurs between bank accounts). To do this, one would have to sell USD/JPY on the T+2 day, and then buy it back the next business day, which is where the FX swap comes in. On day T+1, one business day before the original USD/JPY trade settles, one will "roll tomorrow/next", which is essentially 2 FX transactions in one: A) Sell USD/JPY for value date T+2, B) Buy USD/JPY for value date T+3. Under Covered Interest Parity, we can work out the 'fair' value for USD/JPY for value date T+3, with the spot exchange rate and their respective interest rates as formula inputs. Because overnight JPY interest rates are effectively zero, while overnight USD rates are 5.31% (using SOFR), and assuming no currency basis, the forward value of USD/JPY will be lower than the spot value. In other words, the "tomorrow/next (T/N)" FX forward points are negative. Assuming it is now day T+1, if USD/JPY was traded for T+2 settle (tomorrow), and the T/N points are -2.5 (or -0.0025 yen), then at the present moment one can "lock in" an exchange rate that is 2.5 pips lower for T+3 settle. To rollover an existing long USD/JPY position, one would do a "sell/buy" FX Swap -- simultaneously sell USD/JPY for T+2 settle and buy USD/JPY for T+3 settle at 2.5 pips cheaper, effectively earning the 0.0025 yen. This is the carry for a long USD/jPY position. Conversely, carry will be negative for a short USD/JPY position. The same mechanism applies for all other (deliverable) currency pairs. For retail, the broker aggregates customer positions and rolls the net long or short position accordingly and pay out/deduct carry on your behalf. Because brokers tend to take a fat cut of the carry or charge high fees for rollovers, a retailer can expect to make a lot less from FX carry trades (or lose a lot more for -ve carry positions). As with all carry trades, one loses money when the underlying asset price moves against you by more than the profits from carry. More on reddit.com

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That’s the opposite of a carry trade. A carry trade would be borrowing in the lower yielding currency and buying/lending in the higher yielding one. For example, you borrow in JPY and use that to buy USD denominated bonds. That would be a carry trade. You have to understand that it’s pretty risky, though. If the JPY rises in value relative to the USD, it could go very wrong for you. Don’t get involved in this kind of trade until you’ve studied a lot and specially learn how to manage risk. You’re nowhere near there. More on reddit.com

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