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Trading forex during holidays
Written by: PaxForex analytics dept - Tuesday, 26 May 2015 0 comments
Many cite one of the biggest advantages of trading forexthe fact that it is decentralized unlike trading equities. The reason this is an advantage is that the forex market does not close for trading during holidays observed in individual countries. For example yesterday the UK observed its Spring Bank Holiday and was closed for trading while the US observed Memorial Day and was also closed for trading, but the forex market was open.
The benefit of a decentralized market is that just because one or two countries are closed for trading does not mean other countries will be unable to trade. The forex market basically remains open 24 hours for five days per week and is only closed for trading during the weekend. There are advantages and disadvantages for forex traders during times when major markets are closed for holidays which need to be considered.
What are the disadvantages of forex trading during holidays? While forex markets remain open during holidays, traders of those countries are usually absent which means there is a drop in volume. This translates into more erratic
moves especially when a fundamental report is released. Moves witnessed during those periods should often be ignored as they could be reversed once all traders are present. Most price action moves remain highly irrelevant.
What are the advantages of forex trading during holidays? The lack of volume which can lead to an increase in volatility, especially during the release of economic reports, does open attractive trading opportunities and forex traders can take advantage of this. Forex traders who require less market movement could use this to enter larger volumes with shorter stop loss orders in order to magnify the potential trading benefit.
How to best profit from trading during holidays? Since most of the trading action will be located around the release of economic reports of countries which are open for trading forex traders should seek opportunities there as volatility as well as volume will briefly pick-up. For the rest of the trading session those reports will likely have the biggest impact on the forex trading sessions and currency pairs impacted by them may yield the best results.