Forex trading is a lucrative market that is open 24 hours a day, five days a week. However, experienced traders often avoid trading on Thursdays and Fridays. There are several reasons why it is not recommended to trade forex on these days.
1. Low Liquidity
One of the main reasons why experienced traders avoid trading on Thursdays and Fridays is because of low liquidity. This is because most traders and investors tend to close their positions before the weekend, which causes a decrease in trading volume. Low liquidity can result in wider spreads, slippage, and increased volatility, which can lead to unexpected losses.
2. News Releases
Thursdays and Fridays are typically the days when major economic news releases are made. These news releases can have a significant impact on the forex market, causing sudden price movements and increased volatility. As a result, traders who are not well-prepared for these events can suffer significant losses.
3. Weekend Risk
Another reason why experienced traders avoid trading on Thursdays and Fridays is due to weekend risk. This refers to the risk of holding open positions over the weekend, when the forex market is closed. Unexpected events such as political turmoil or natural disasters can occur over the weekend, which can cause significant gaps in the market when it opens on Monday. This can lead to sudden losses for traders who were not prepared for these events.
4. Fatigue
Trading forex requires a high level of concentration and mental alertness. However, traders who trade on Thursdays and Fridays may experience fatigue due to the long trading week. This can lead to poor decision-making and increased risk-taking, which can result in significant losses.
5. Trading Volume
Thursdays and Fridays typically have lower trading volumes than other days of the week. This can make it difficult for traders to find suitable trading opportunities or to execute trades at their desired price. Lower trading volumes can also result in wider bid-ask spreads, which can increase trading costs.
In conclusion, experienced traders often avoid trading on Thursdays and Fridays due to a combination of factors, including low liquidity, major news releases, weekend risk, fatigue, and lower trading volumes. While it is still possible to trade forex on these days, traders need to be aware of the risks and take appropriate measures to mitigate them. This includes staying up-to-date with economic news releases, managing risk effectively, and maintaining mental and physical well-being.
