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Can You Trade During Christmas and New Year?
Written by: PaxForex analytics dept - Monday, 25 December 2017 0 comments
Many forex brokers, especially of the online variety, have facilities available for trading on these major holidays. But the reality is that the volume becomes very thin. Because the forex is 24-hour, worldwide market, you would think that this would be the greatest of times to trade, especially since money is flowing everywhere in commerce. Traders who want to take a chance and trade on such days have to realize that the liquidity is low, the analysis is difficult, and the risks are high.
There are countries that choose not to trade on certain days, which of course has its impact on such an indicator as volatility. During holidays, especially if we are talking about the holidays celebrated in America and Europe, at the forex market the rates of the large majority of the currency pairs are not changing for one simple reason: nothing is moving them. Therefore intraday trading in such a period is not recommended. Traders who still want to take a chance and trade on such days have to realize that the liquidity is low, the analysis is difficult, and the risks are high.
When the forex market has low liquidity, it basically means that there aren't many forex traders actively trading currencies. Although forex exchange market is the world's most liquid financial market, this doesn't mean that the forex market isn't subject to varying liquidity conditions that currency traders need to keep in mind, like trading during Christmas time. Even
during normal days liquidity will vary throughout each trading day differently. A low liquid market will tend to have prices moving more dramatic and in larger price increments when a bad news event hit the market.
As we all know, even on the days when they allow some trading during this period, there’s going to be terrible and unpredictable price movements with higher spreads than normal. Trading during this time is folly, especially if you are a scalper. Price spikes are often a common phenomenon during periods of low liquidity. All it takes is someone with large enough equity to place a large order which would inadvertently cause large spikes or even gaps in the market. Because of the lack of liquidity, such sudden orders with large volumes can be easily used to take advantage of the situation especially at the cost of the retail trader.
Common sense might say to us "don't trade around Christmas" but the deep impulses which destroy forex psychology get the best of us. The forex markets are unforgiving and will gladly take your money if you throw your money at it. Many inexperienced forex traders will make the mistake of making a little money early on (if they even make money) and then giving it all back plus interest as the new year comes because they are not aware of what's happening in the markets.