Forex Trading over the Holidays? Not the Best Idea

As liquidity dries up and spreads are soaring, even the basic indicators fail to deliver. Ashton Fraser explains why the

For forex traders, it’s that time of year again. The time which harbours a love–hate relationship.

While many traders love the time off the screens, spending time with their families and having a break, it’s not that infrequent to find a few bemoaning the fact that their broker has shut down, disabling their platform and thereby eliminating the ability to make a single trade.

Join the iFX EXPO Asia and discover your gateway to the Asian Markets

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. Hence, when they’re closed, it’s natural that everyone else, including forex brokers, follow suit. Come on, even bankers need a holiday, right? As a result, forex brokers shut down for a few days.

holidays
Trading hours schedule on Forex.com’s website.

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’re a scalper.

Here’s an example from the USD/JPY on the M1 timeframe. Overall, USD/JPY is usually smoother in price action (along with AUD/USD) compared to most other pairs, but even here you can see it’s not a pretty picture.

chart USD/JPY forex

Take a look at the multitude of appalling price action occurrences:

– Consecutive long candles, followed by many short candles which really skews with the ATR

– A lot of the candles having huge wicks and barely any candle-body

– Whipsaws are visible within quite a few of the candlesticks

Suggested articles

Is It Worth Investing in Affiliation in 2019?Go to article >>

– Often you’ll see gaps appearing in data with price stalling for a few seconds, only to jump rapidly to an unexpected price

– Candle open prices are on many occasions different to the previous candle’s closing price

Failing indicators 

All of these negative trading attributes virtually makes any sort of technical analysis very difficult, indeed. Just try using some classic trading tools and indicators such as the Bollinger Bands or the Awesome Indicator.

Even tried and tested indicators that analysts have been using for decades are no longer reliable. Overbought or oversold on RSI or Stochastic doesn’t mean much any more.

So with barely any liquidity (which can result in your orders being executed in slow motion), and with barely any volatility (which means your 61.8% Fib retracement level may never get hit!), there’s no point in trying to make any pips during these winter nights. The best thing to do would be to grab a mug of your favourite hot beverage, lay back and watch the news or football instead.

There’s some top-flight football on during these days in the UK. The Premier League matches can be a good way to take your mind off trading then, if you forget for a minute who are the sponsors of an increasing number of clubs.

———————–

Ashton Fraser is routinely publishing his trading strategies at Forex Lasers

 

If you wish to become a Guest Contributor, please get in touch with our Community Manager and UGC Editor Leah Grantz leahg@forexmagnates.com 

Got a news tip? Let Us Know