Forex Trading on a Holiday Week
Trading on the foreign exchange (Forex) market is a job like any other. However, unlike most markets, the Forex markets never sleep—which also means they never take a break for the holidays. Should Forex traders schedule their own holidays off, or are there deals to be had while others are sitting down to a holiday meal? Learn what to watch out for if you try your hand at some holiday trading.
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Forex Seasonal Cycles
Experienced traders know that there are some distinct intraweek patterns in the Forex markets. The same goes for seasonal patterns. Generally, January through May and September through November provide the most volatility (and therefore, the most opportunity). June, July, and August mark the summer slump when volatility wanes and some long-term traders close their trades. However, there are some exceptions to these trends, outlined in more detail below.
Holiday Trading Challenges
After the autumn boom comes the “Christmas freeze”—a period of low volatility that often lasts until after the Chinese New Year. During these holiday slumps, liquidity tends to be low, risks tend to be high, and it’s often more difficult to analyze the trading landscape. Some traders avoid the holiday trading sessions entirely, preferring to focus on the more profitable spring and autumn months to take their profits.
When trading around the holidays, it’s also important to remain conscious of the risk of burnout. Because the Forex market doesn’t provide natural breaks like other markets, traders must set their own breaks and avoid the temptation to work 24/7/365. The summer slump and low-volatility holidays can provide just such a chance to recharge, and traders in the know will take advantage of every opportunity for a restful pause.
Holiday Trading Advantages
Although holiday trading can involve low volatility, this isn’t always the case. And when economic reports are released just before (or during) the holidays, the trading opportunities that result from this news can provide quite a bit of upside. With both volatility and volume picking up, traders can magnify their benefits by entering shorter stop-loss orders and focusing on the currency pairs that are most impacted by the economic reports. Traders who wish to capitalize on these economic reports over the holidays should be sure to note when the reports are to be released and update any algorithms to account for sudden, unpredictable swings in valuation.