A carry trade is a incentivized trade because a trader earns a positive daily swap from holding the position. This positive swap come from the difference in interest rates between the pairs of that market.
A popular carry trade example at the moment is a buy trade on AUDJPY or USDJPY.
AUD and USD having positive interest rates set by the central banks, whereas the yen has a near zero interest rate.
This difference comes as a earning for holding that position referred to as a swap often on a daily basis, however there can be slight variations between Forex Brokers. How much a trader earns from the swap depends on the pair, however it can be quite substantial in certain times due to the differences in interest rates on certain currencies.
An example of when a currency becomes less attractive for a carry trade is when a central banks lowers interest rates, lowering interest rates reduces the incentive of holding a position long term as the carry would reduce or could reduce to a point where the carry stops making sense anymore.
The beauty of the ‘carry trade’ is that you are earning the yield ( swap ) from a margined position, thus allowing a trader to earn much more yield than they would from an unleveraged position, of course depending the margin amount and lot amount you are using.
