FOREX - HOLIDAY TRADING GOOD OR BAD IDEA ?

As the widely observed holidays approach, you, as a trader, may wonder whether it would be a good idea to trade in the foreign exchange (FOREX) market on these special days. Because the FOREX is 24-hour, worldwide market, you would think that this would be the greatest of times to trade, especially since money is flowing everywhere in commerce. But what is it really like to trade on the holidays?

Market Open

You will generally find the markets open even on the major holidays like Christmas Eve and Christmas Day, New Year's Eve and New Year's Day, as well as on the U.S. Thanksgiving. The vast FOREX is true to its insomniac nature during the festive season and follows it regular schedule. Throughout the trading year, the U.S. or New York Session is one of the largest in the FOREX. However, you must also remember that U.S. banks are very liberal with taking holidays off. Therefore, just because the FOREX market itself is considered open, that does not mean that the banks are all open and rendering full service.

Brokers' Platforms Open

Many FOREX Brokers, especially of the online variety, have facilities available for trading on these major holidays. But the reality is that the volume becomes very thin. Let's face it-even traders like to take time off to spend with their families and friends and spend money at the mall. The effect of the decreased volume in the FOREX is decreased liquidity. When a market does not have liquidity, it is difficult, at best, to get in and out of positions profitably. On the other hand, when there are lots of traders participating, fun can be had and money made. The U.S. Thanksgiving is not going to be as quiet as Christmas in the FOREX market, since it will perhaps affect only the U.S. Dollar-based currency pairs for the most part. Apparently, other countries and their traders are not as excited about our national holidays as we are. Surprise, surprise.

Downside Risks

One of the consequences of a market that is not so liquid is the increase in the spread charged by the broker. You will notice a similar effect during any given weekend of the year, by virtue of the same reason of lack of liquidity. Naturally, as a trader, you prefer the smaller spreads, since you get to keep more of the profits in your pockets as a result.

Conclusion

So then should you or should you not engage in FOREX trading on these holidays? If you like boring and expensive trades, then go for it. Otherwise, look your loved ones in the eye and tell them that you are so thrilled to spend some quality, uninterrupted time with them. Then prove it by spending some of that quality cash you earned during the previous months. Happy spending!