Worst Times to Trade Forex

Worst Times to Trade Forex

Submitted by adil on Wed, 03/26/2014 - 05:31

Very few people have written about “when it is better not to trade Forex”. It is absolutely important to know about the best time to observe charts or place trades but it is equally important to what is the time when one should not trade currencies. You need not be awake all day long just because currency markets are open for 24 hours a day. Trading on times when market is inactive can result in considerable loss of time and money.

Following lines explain times at which it is foolish to trade Forex especially currencies.

Friday Afternoon and Weekends:

Markets start slowing down on Friday afternoons because hedge groups and big banks close their positions on Friday for weekends. The security concerns are basically responsible for this early closure as big players do not want to leave their open positions unsupervised on weekends and same is true for individual traders. Similarly, a big gap between Friday closing rates and Monday Morning rates might be created by bigger swings in rates happening due to positions left opened on weekends. The system normally does not record this swings or price gap and therefore, stop loss orders might fail to execute especially if these rates moves above the rates set by traders as stop orders.

Release of News Events:

When major economic numbers are about to be released, traders should not open or close the trades. These numbers or events include Central Bank announcements and monthly employment reports of various countries. This news can cause markets to move in unpredictable or opposite direction of the market sentiments and create plenty of risks for the traders. Traders can take help of Economic Forex Calendars to verify if the news is important and big.

Market Closing Times:

A trader must closely monitor the closing times of world’s major markets such as Tokyo, New York and London if he is determined to trade on Friday afternoons ignoring uncertainties in price movement altogether. This is because traders can experience high spreads and slips resulting in huge overall loses as liquidity and rates can fluctuate widely during these closing times.

Asian Sessions:

Asian markets comparatively offer fewer amounts of resources to trade as compared to European or American markets. Therefore, it is difficult to cover high spread of Asian currencies because of the too average pip movements.

Bank Holidays:

You also need to know about all the major bank holidays in the market you are trading in. A major bank holiday slows down the trading and liquidity and this especially true for bank holidays in USA and UK.

Overnights:

Many brokers charge extra fee for overnights or positions left open for night. You need to verify if this is suitable for you before opening any long term position.

End of December:

The volume of commercial transactions can decrease dramatically during last decade of December because most of the employees of banks and other financial institutions are on holidays.

Prime Time TV Shows:

Many popular TV shows such as X Files and FIFA Football World or Superbowl finals can create the same impact as that of holidays. These events are normally not included in financial calendar and they can become a useful tool for trader.