Trading Foreign Currency Exchange: Holidays

Foreign Currency Exchange on Holidays

The foreign currency exchange market is always open, but this does not mean you should always be trading.  Most new traders make the mistake of wanting to trade all the time.  While they may realise that they cannot sensibly trade all day, they may not realise that there are certain times of the year that should be avoided as well.  Holiday trading is very tempting for a number of reasons, especially for traders who have other day jobs.  The fact is that there are a number of reasons why you shouldn’t trade during these times.

The Liquidity of the Foreign Currency Exchange

During the holidays the forex market will not have the same amount of liquidity as it usually has.  The majority of trade on the forex market is done by large organisations and banks.  These organisations are closed over the holidays which mean they are not trading.  When they are not trading the market will be slow and two way trades will be hard to complete.

There is another problem that comes with this limited liquidity.  If a trader were to put through a large trade order the currency pair rate can change.  This means that one person could swing the market and this makes it very hard to predict.

The Unexpected Movements of the Market

As the market will have limited liquidity the behaviour of the forex market will be rather odd.  In fact over the holiday period the market moves in ways it does not move during other times of the year.  Trends can take sharp reversals which are highly unpredictable.  This unpredictability means the market can turn against you without warning and you will not have the time to react.  Traders who are on during the holiday season generally lose more on their trades than they gain.

The Limited Activity

During the holiday seasons there are generally very few people on the forex market at all.  The lack of activity means that technical analysis is a bit useless.  As there is no economic news taking place fundamental analysis is not much help either.  The market at these times is so slow that many traders feel it is not worth the time and effort to trade.  Even if you are going to make a profit it is generally so small that you may have been better off not trading at all.  This is particularly true if you think about the risks of trading at this time as well.

Taking Some Time Off

Trading forex should be looked at like a business.  With this in mind you should consider taking some time off as well.  Every business gives their staff holiday and you should take some holiday when you are trading forex for a living.  Taking some time off from trading allows you to come back fresh and you will be able to trade calmly.

You should also consider that the holiday season is the time to spend with family.  You don’t want to be sitting on the computer trading when you could be having fun with your family.

 

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