Is it wise to trade forex if it’s a public holiday in one of the countries?

Trading forex during public holidays in one of the currencies’ countries can be risky, so caution is advised. There are a few things to consider:

1. Liquidity may be low. With one major market closed, liquidity often drops significantly for the related currency pair. This can lead to volatile price swings that are hard to predict. It may be difficult to get in and out of positions at your desired price levels.

2. News events are limited. There are typically fewer economic reports and news events on public holidays to drive the markets. Without major catalysts, the price action may appear “choppy” and random. This can trip up technical traders and trend followers.

3. Spreads may widen. Brokerage firms often widen the bid-ask spreads on currency pairs when one of the major markets is closed. This is to account for the lower liquidity and higher volatility. The wider spreads mean higher costs for traders.

4. Gaps are possible. When the closed market reopens, there is a possibility of price gaps forming on the charts. If you have open positions during the holiday period, these gaps can lead to losses as the price may jump against your position.

However, public holidays also present some trading opportunities:

• Trends may continue. If there is an ongoing trend leading into the holiday, it may continue for a few more hours after the close. You may be able to ride trends for a bit and exit before volatility picks up.

• Volatility spikes. Some traders look for volatility spikes during low-liquidity periods around holidays to trade in and out quickly. If timed right, short-term profits can be captured from volatility.

• Gaps can be favorable. Gaps that form when a market reopens can sometimes occur in the direction of the overall trend. If you time it right, you may enter a trade after the gap that continues the trend. But unpredictable gaps can also go against you.

So in summary, while forex trading around public holidays in related currencies can be risky due to volatility and uncertainty, it offers some short-term opportunity as well for active traders. But for most traders, it is probably wiser to avoid trading for a few hours around the holidays due to the added volatility and costs. If any positions are left open during the closed market hours, manage risks carefully.

Tags: No tags

Add a Comment

Your email address will not be published. Required fields are marked *