When NOT to trade

Guest post by Yohay Elam of Forex Crunch. There are many articles on the web about the best times for

Guest post by Yohay Elam of Forex Crunch.

There are many articles on the web about the best times for forex trading. While there are better hours than others, the temptation to trade is always strong. Here aare 4 cases in which trading is NOT recommended.

1. Non-Farm Payrolls: I guess that this one is quite obvious. During big economic releases, with NFP being the king of forex, currency pairs go and down quite sharply for a few hours. You can never know if they reached the top of the wild range, and if it’ll swing back down, or the other way around. It can jump out of the wide ranges unexpectedly. It can also swing in an extreme manner, only to throw you out of your position.

2. Timothy Geithner: The American secretary of Treasury slips more than once. He once said that he doesn’t object abandoning the dollar as the world’s reserve currency, only to “clarify” his words a few minutes later. During this time, the dollar plunged, only to return to normal trading after Geithner clarified his position. Geithner is not alone: other public figures tend to say something they didn’t mean to, possibly throwing you out of a trade.

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3. Monday’s Asian session: While Europeans are asleep and Americans are still enjoying their sunny afternoons, trading begins in the eastern side of the globe. The volume is very small – something that can cause sharp and unexpeted moves. Occasionally, a weekend gap is possible. Mind the gap! The London session usually “fixes” it eventually, but in the meantime, you’re out in the dark.

4. Friday Effect: I’m talking about the time that Non-Farm Payrolls are released, 12:30 GMT. Also an hour and a half later, data is released, and the market still behaves rather normally. I’m talking of later hours, around 16:00 GMT. Contrary to Monday’s Asian session, the problem here isn’t the volume. Despite significant volume, the market can go wild. Many traders seek to close their positions before the weekend, in order to avoud unwanted worries. Sometimes, this will to close positions takes a specific direction, and erases steady moves. Yet again, the “Friday effect” doesn’t happen every Friday, making it another unexpected phenomenon that you’d prefer to avoid.

These are the 4 major scenrios in which trading isn’t recommended. Do you have an experience to share? Please comment.

You can read a bit more about this topic as written by Joel Kruger, Technical Currency Strategist, DailyFX.

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