If you celebrate Christmas but are also interested in forex trading, or perhaps you are even a professional forex trader who trades currencies for a living, you will probably think about forex trading around Christmas. You might think about whether or not forex trading at Christmas is the right thing to do as a forex trader. A very real trap for the keen forex trader during the Christmas and New Year break, is the lure of spending additional time in front of the screens in the continued quest for trading excellence.
In theory, one might think that since these holidays are the busiest time for commerce with money flowing like no tomorrow, a 24 hour global market should allow ample opportunity to trade. Except, of course, it’s primarily the banks who are the major movers of the currency markets. As a result, forex brokers shut down for a few days. 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.
The fact is that holiday periods aren’t particularly great for forex traders, since a lot of people do take time off around these periods. This makes the forex market less liquid during these periods and low liquidity isn’t really a desirable market condition. Ideally you want high liquidity, or as much liquidity as possible, because high liquidity will give you a greater chance of making significant profits. When Forex traders aren’t placing so many orders as usual, the forex market loses liquidity and the prices in the market for currencies tend to go flat.
It is well-known that forex brokers like to keep their profits for themselves. To protect themselves in low liquidity and low volatility they increase the bid ask spread during the holidays. This has two effects it makes scalping the market a very difficult proposition and it also discourages traders from becoming too exposed to unfavorable conditions, but mostly it builds in some extra protection for your broker if you do trade during these periods. It is of critical importance that you take the time to review your brokers terms and conditions and their trading times over the holiday season so you can see when the spread conditions are likely to be impacted.
In conclusion, the conditions of the forex market are not favorable for forex traders during the Christmas and New Year period, so it is best to take some time off to either rest or study. It would be better to just take time off altogether and enjoy the end of the December and early January, however, if you don’t celebrate Christmas or do but would like to stay as productive as you can without testing the poor market conditions, you could always do some studying. Once the markets return back to normal, you could then go back as you were feeling fresh, with perhaps some more knowledge that you didn’t have before the holiday period.