I am sitting here remembering how much I loathe trading the summer doldrums. A few minutes ago I received a text from the Apiary Fund development team asking me to place a few live execution trades through one of our new liquidity providers. It is about 4:46pm Mountain Time and there is nothing happening. The chart is so flat it makes the Utah Bonneville Salt Flats look like mountains! And trading is so slow that I’ve started keeping track of which comes first; a new tic or a new minute. So far the minutes are in the lead!
Welcome to trading the summer doldrums. The doldrums are the period of time between close of the US market and the open of the Asian market when even sleep takes a nap and nothing happens in the currency markets. And if you thought the doldrums were bad, then the summer doldrums take it a notch slower! Summer is notoriously slow as traders take a break from trading and head out on vacation!
While most internet company’s in the world look at midnight to perform maintenance on servers and so forth, in the currency markets we use the doldrums. Its a time when many brokers perform some of the mundane tasks such as calculating your carry interest.
When you trade currencies you borrow money in one currency to buy a different currency. You have to pay interest on the money that you borrow. Fortunately, you get paid interest on the currency that you buy.
If the interest rate of currency you borrow is greater than the interest rate of the currency you bought, then you’ll end up paying the broker a little bit of interest. If the opposite is true and the interest rate of the currency you bought is greater than the interest rate of the currency that you borrowed, then instead of paying the broker, the broker will pay you! Which is good, because sometimes that’s the only money you’ll make during the summer doldrums!
As for me right now, I suppose I’ll just have to wait for Aussie’s to stir things up a bit!