When Not to Trade Forex
There are times when you should not trade Forex because at this times the Forex market becomes illiquid an unpredictable. Illiquid means there are fewer traders compared to other regular times. The times not to trade the foreign exchange market are:
Scheduled economic data is released throughout many times of the month. These can be found, in advance on a Forex Calendar
There are 3 categories of news; yellow, orange and red, each category having a different impact. High impact fundamental news can really move the prices, sometimes causing a spike in both directions, before moving towards one direction. These are high risk times where a lot of people get stopped out.
However, it is not just the announcements themselves that can affect the market. The sentiments and predictions of what the numbers will be can cause the prices to move in anticipation. It is therefore not a good idea to trade during news hours.
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Some major economic news like the NFP and Interest Rates decision can cause extreme volatility which is extremely hard to trade and can cause extreme movements in Forex markets within seconds.
Economic data can cause a lot of speculation and therefore a lot of price movement.
A lot can happen over the weekend leading to the market opening with a large gap. This can cause a big difference in your Forex account.
Market closing times- NY closing
At the close time a number of trading positions are being closed or being swapped. This will lead to volatility in the currency prices and can cause the price to move erratically.
During the Asian session volumes are very low and the market move in a trading range of about 20 to 30 pips and it becomes very hard to trade because the prices falls flat. Unless you are trading JPY and AUD currency pairs it is best not to trade at this time.
Do not transact during Holidays. This is because the Banks are closed and therefore less participants in the Forex market. If banks close for a holiday then the volume of transactions carried out is greatly reduced. This can lead to low volatility.
Holidays like Christmas and new year traders should not trade on these days and should take time off during this week of Christmas up to new year, date 2 when banks resume their operations. An Economic Calendar will include a schedule of bank holidays and traders can keep updated.