When is it the Wrong Time to Trade?

If you have been involved in the forex markets for any amount of time you will know that the best trades often come when markets are moving and there is plenty of action. Similarly, professional traders have learnt through painful experience that there are times where it is simply better to not trade at all.

The most successful traders know there is no need to trade every day. It is much better to pick your spots and only trade when certain conditions line-up. Here are some moments when you might be better off out of the market completely:

Public holidays

Often, major holidays in the US are among the worst days to trade the forex markets. When there’s a public holiday and the US stock markets are closed, volume across all financial markets dries up. Volatility in currencies drops so traders looking for a big move often get caught out. Professional traders look for very small profits on these days or take the day off completely.

Around important news events

Unless you have a specific strategy in mind for a news event and you have worked out that the risk:reward is balanced in your favour, it’s usually better to stay out of the market altogether during news releases. This isn’t the case for small events, like initial jobless claims, but bigger, market moving releases like non-farm payrolls or GDP. These numbers can move markets sharply and trying to predict what will happen is tricky.

Choppy markets for trend traders, trending markets for range traders

If you are a trend trader or trend follower there is one thing you need to make money more than anything else and that is a market that’s trending. Therefore if a market is not trending smoothly you’re going to get seriously whipsawed and lose a pack of money.

Likewise, if you’re a mean reversion trader or range trader, the worst thing you can do is to trade a market that keeps trending in one direction. Using the wrong trading style in the wrong type of market is one of the quickest ways to the poor house so make sure to pick the right market for your style.

Flat markets

Sometimes markets are just not in the right frame of mind to trade on. If a currency has just been through a big upward or downward move, it will often enter a period of consolidation where traders take a breath and stop betting on further movement. This leads to a drop off in volatility and tight ranges that are difficult for forex traders to make money on. Similarly, when equity markets are shut during the quiet Asian session it is a difficult time to trade.

Traders are better off waiting for market volatility to pick up before making their trades.

About the Author
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC. Our mission is to maximize the value our clients derive from their most precious commodity, "Time"! By offering advanced and innovative services, optimal customer care and perpetual devotion to our clients, we will ensure that their individual needs are always met as markets continue to evolve over time. Visit ForexTime to learn more www.forextime.com [space height="20"] [social type="facebook"]https://www.facebook.com/ForexTime[/social] [social type="twitter"]https://twitter.com/ItsForexTime[/social] [social type="google-plus"]https://plus.google.com/u/0/+ForextimeFXTM/posts[/social] [social type="youtube"]https://www.youtube.com/user/ItsForexTime[/social]

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