Forex is a global currency trading market that operates 24 hours a day, five days a week. It is a highly liquid market that allows traders to buy and sell currencies at any time of the day. However, not all times are equal in terms of market activity, volatility, and liquidity. There are certain times that traders should avoid trading forex in order to minimize risks and maximize profits. In this article, we will discuss the times to avoid forex and the reasons behind them.
1. Weekends
Forex markets are closed during weekends. This means that there is no trading activity on Saturday and Sunday. Traders should avoid trading on weekends because there is no liquidity in the market. Liquidity refers to the ability to buy or sell a currency without affecting its price. During weekends, there is no liquidity, which means that traders may have to accept unfavorable prices if they need to trade urgently.
2. Holidays
Forex markets are also closed on holidays. Traders should avoid trading on holidays because there is no liquidity in the market. Holidays vary from country to country, so traders should always check the forex calendar to know when the markets will be closed. During holidays, there may be low liquidity, which can lead to wide spreads and slippage.
3. Early Asian Trading Session
The Asian trading session starts at 6:00 PM EST and ends at 4:00 AM EST. This session is characterized by low liquidity and volatility. Traders should avoid trading during this session because the market is relatively quiet, and there may be few trading opportunities. The low liquidity during this session may also result in wider spreads, which can increase trading costs.
4. Mid-Week
Mid-week, specifically on Tuesdays, Wednesdays, and Thursdays, is generally a good time to trade forex. However, there are certain times during mid-week that traders should avoid. For instance, the period between 3:00 AM EST and 4:00 AM EST is characterized by low liquidity, as it overlaps with the end of the Asian trading session and the beginning of the European trading session. During this period, traders should avoid trading because there may be wider spreads and slippage.
5. Major Economic News Releases
Major economic news releases, such as non-farm payroll reports, interest rate decisions, and GDP reports, can significantly affect the forex market. Traders should avoid trading during these news releases because they can cause sharp price movements and high volatility. These price movements can result in significant losses if traders are on the wrong side of the trade. Traders should wait until the news releases have been fully absorbed by the market before trading.
6. End of Trading Sessions
The end of trading sessions, particularly during the New York trading session, can be volatile. Traders should avoid trading during the last hour of the New York trading session, which is between 4:00 PM EST and 5:00 PM EST. During this period, there may be a surge in trading activity as traders close their positions before the end of the trading day. This surge in activity can lead to wider spreads and slippage.
In conclusion, forex trading is a 24-hour market that offers many trading opportunities. However, traders should avoid trading during certain times to minimize risks and maximize profits. Traders should avoid trading during weekends and holidays when there is no liquidity in the market. They should also avoid trading during the early Asian trading session when the market is relatively quiet. Mid-week is generally a good time to trade forex, but traders should avoid trading during the period between 3:00 AM EST and 4:00 AM EST. Traders should also avoid trading during major economic news releases and during the last hour of the New York trading session. By following these guidelines, traders can minimize risks and increase their chances of success in the forex market.
