Martin Luther King Day – A Lesson In Holiday Trading

Since today is a holiday in the US I thought I would discuss a little about holiday trading.  Although most forex brokers are still open on this day the stock market and banks will be closed.  Even though forext traders can still trade we need to remember that the banks and financial institutions create the majority of the forex volume.  Because of this, when banks are closed, the forex market is much less liquid than normal.  Also, individual traders become more of a force and can influence the market a bit more.  When this situation occurs we can see two things happen.  First, the market can become even more volatile than it may normally be or second, it can become very flat in the moves.  In either situation the markets become less deliberate than what we would like to see happen when we are trading.

If we are trading in a non-deliberate market we can be entering into trades that have a lower probability of success.  If we can focus our trading on higher probability and more deliberate markets we are going to find that our success levels increase.  So, if the market is less deliberate and therefore less reliable what can we do when the banks are closed and trading volume is less?  Well, let’s talk about some of the things we can do on holidays such as Martin Luther King Day. 

  1. Stop trading:  This might sound a bit drastic but it is an option for us when the markets are less deliberate.  When we stop trading we can observe the market to see what is happening so we can better understand the reasons why we might not want to trade on a holiday.
  2. Trade demo:  We can take our live trading and move it to a demo account.  This will allow us to continue to trade but without the risk of our live accounts.  We can continue to practice while we allow the markets to settle back into more normal trading.
  3. Analyze: We can take the time we would normally be trading and begin to analyze our trade, our strategy and our mental trading state.  It is good to do these things on a regular basis and during the market holiday is a great time to do this.
  4. Back test:  This is a prime time to test out strategies that you might be interested in trying out. Take this time to create your rules and go back in time to test out how they have worked in the past chart history.
  5. Read:  This is a great time to catch up on reading about the forex market.  Keeping fresh in our minds the things that are most important such as trading psychology and risk management.  Pull out that trading book you have been wanting to read and get to it.

Now these are not the only things you can do but are some suggestion of things to do when the markets are in holiday mode.  It is always better to exercise caution when trading and to try and trade when our probability of success is the greatest.  Avoiding holiday trading is one way to put the market in our favor when trying to trade successfully.

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