Why Holiday Forex Online Trading Should be Avoided
The forex market is a 24 hour market that is open all year. However, this does not mean that you should be trading all the time. There are certain times of year when it is recommended that you not trade at all and the holidays and the holiday season is one of them. You should avoid the market on public holidays and during the December holiday period of 24 December to 10 January.
Unpredictable Market Conditions
During the holidays there is an increased volatility in the market. This makes the pricing of the currencies highly unpredictable and they can fluctuate more than they normally would. During the holiday season it is not uncommon for the price of a currency to swing 50 pips in one direction. The sudden changes in the market during this time make it very hard for the average trader to keep up and actually make profitable trades. Automated systems should also be taken offline during this time as they work on technical indicators. The algorithms which make up the software can often misinterpret the unpredictable currency swings. This can often result in major losses for you as the software continues trading without taking the new variables into account.
Low Market Liquidity
During the holiday season the overall liquidity of the forex market drops. This is mainly due to the market leaders taking a break. Market leaders, banks and hedge funds do not trade during these times so there is minimal movement on the exchange because their large scale trades are not there. These foreign exchange heavy hitters know what they are doing and it is best that you follow their lead in this. That means that you should take a break from the market when they do.
Recharging for Future Forex Online Trading
Your health is one of the most valuable assets you have. There are certain things which can have a serious negative impact on your health such as stress and emotional burdens. Taking some time to recharge your body and mind can limit the amount of strain these factors place on you. Holiday’s are the best time to relax and unwind. The main benefit of taking the holiday period off is that recharging your body allows you to continue what you are doing for longer.
Increase in Broker Spreads
The low liquidity of the market at these times affects the spreads on all trades. The absences of large movement means that propositions in bid and asks are low and brokers need to make their money somehow. There is no way of predicting the exact date that a broker will widen the spread so you have to be very careful and aware when entering trades around the holidays. If you want an idea of when the holiday season is over you can look at the spreads. These will return to the normal market indexes at the end of the holiday season.
There are a number of reasons why you should not trade during the holidays. The most important is that you are unlikely to make large profits and you could end up losing money through the instability of the market.
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