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5 tips for holiday trading
Information is not investment advice
The end of December and the start of January is a peculiar period for financial markets: trading schedule changes because of holidays and many traders get away from their terminals. The natural question in this situation, “Is it possible to trade at all during these two weeks?” FBS answers: yes, it’s possible! You just need to keep in mind several tips and you will be make money while others rest.
Tip #1 – Take seasonal trends into account
If you already have some experience in trading, you have probably noticed how currencies tend to fall during one period of time and rise during another – what we know as a “seasonal tendency”. In particular, the so-called “year-end” effect is that the USD tends to weaken in the final days of each year, but then starts recovering in January or February. This happens because of deadlines for taxation and reporting. In addition, many positions are closed before the end of December and reopened at the beginning of January. Take these things into account while planning your trades and be careful with your money.
Tip #2 – Readjust stop-losses and take-profits
Normally volatility subsides during the holiday period. That’s why you may need to readjust the sizes of your standard stop losses and take profits. For example, if you normally place take profit 100 pips away from your entry point, it might be better to choose a target of 70 to 80 pips.
Tip #3 – Scalp if possible
The market gets less crowded as many people decide to take a break and celebrate. The amount of liquidity is lower than usual. As a result, major pairs tend to spend the majority of time in narrow ranges. In such an environment, there’s sense to consider scalping strategies – don’t forget to check spreads though. In technical analysis, focus on locating support and resistance levels. Range trading techniques may also come in handy.
Tip #4 – Check the calendar
Although there’s no trading on December 26 and January 1, other days will offer you lots of opportunities to open great trades. You can find more about the working time of the market and FBS in the "company news" section of the website. Notice that although the holiday economic calendar contains only few important events, even a small piece of news may move the thin market. So, despite the fact that most of the time holiday markets resemble a calm sea, the situation may change in no time resulting to big spikes of the price.
Tip #5 – Protect yourself and stay alert
Remember about risk management: stop loss orders, for example, will protect you from an unfavorable turn of events. At the same time, be ready to earn on occasional spikes in volatility, monitor newsfeeds, and use mobile versions of MetaTrader to keep an eye on the key instruments.
You may hear that the end of the year is not the best time for trading. However, if you are careful and attentive to the specific characteristics of the market during this period, you will definitely succeed.