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Situations When You Shouldn’t Trade
By: Phillip Konchar
The Forex market is the largest financial market in the world. One of the reasons why the Forex
market has such a large trading volume is because it’s an over-the-counter market which allows
market participants to exchange currencies around the clock, five days a week.
However, despite its non-stop trading hours, there are certain situations during which you
shouldn’t trade. They can increase your transaction costs, lead to high slippage, create fake
breakouts and false signals, or simply lead to the accumulation of losing trades. In this guide,
we’ll tackle those situations during which you should stay away from trading, and show you
what the best times to trade the market are.
When Not to Trade
While the Forex market allows you to place trades around the clock, Monday through Friday,
there are certain situations during which you should stay on the sideline. Some of the most
important events which can cause erratic and unpredictable price movements are outlined in
the following lines.
Try to avoid trading during these situations:
During bank holidays, many banks close their doors and don’t process market orders. Since the
Forex market is an over-the-counter market in which banks play an extremely important role
and are considered one of the market’s big players, bank holidays cause a drop in the overall
trading volume, liquidity and predictability of price-moves.
You’ll see many currency pairs moving only modestly during bank holidays, and the lower
liquidity will usually lead to higher transaction costs by wider spreads. If you’re a day trader
or scalper, there is not much to look for in the market during bank holidays.
That being said, not all banks shut down at the same time. Bank holidays are linked to specific
countries. For example, during a bank holiday in the United Kingdom, there will usually be a
lower trading volume of the British pound. Similarly, a bank holiday in Australia or New Zea-
land will cause a drop in the trading volumes of the Australian dollar and New Zealand dollar.
To know which currencies should be avoided during bank holidays, you can follow a Forex
calendar which lists the dates and countries in which there’re bank holidays.
Here’s a list of upcoming UK bank holidays in 2018 and 2019:
25 December Tuesday Christmas Day
26 December Wednesday Boxing Day
1 January Tuesday New Year’s Day
19 April Friday Good Friday
22 April Monday Easter Monday
6 May Monday Early May bank holiday
27 May Monday Spring bank holiday
26 August Monday Summer bank holiday
25 December Wednesday Christmas Day
26 December Thursday Boxing Day
High Impact News
Another situation when you want to avoid trading is during the release of high impact news.
Again, a Forex calendar may be very helpful to mark those days and times when countries
release their high impact reports. Examples of such reports are non-farm payrolls in the US.
These are released each first Friday of the month. These include preliminary GDP reports, in-
flation reports, labour data reports and central bank meetings.
Currencies tend to become very volatile immediately after a high impact report is released,
especially if the actual number differs to a large extent from the expected number. It’s not
unusual for some currency pairs to move hundreds of pips, caused by the high trading momen-
tum which occurs only seconds after the numbers are published.
Since we can’t know what the actual number will be and how currency pairs will react, the best
trading decision that we can make is to avoid trading at all until the dust settles. The following
table shows typical times when high impact reports are released by developed countries.
Country Currency Time (EST) Time (GMT)
United States USD 8:30 – 10:00 13:30 – 15:00
Japan JPY 18:50 – 23:30 23:50 – 4:30
Canada CAD 7:00 – 8:30 12:00 – 13:30
United Kingdom GBP 2:00 – 4:30 7:00 – 9:30
Italy EUR 3:45 – 5:00 8:45 – 10:00
Germany EUR 2:00 – 6:00 7:00 – 11:00
France EUR 2:45 – 4:00 7:45 – 9:00
Switzerland CHF 1:45 – 5:30 6:45 – 10:30
New Zealand NZD 16:45 – 21:00 21:45 – 2:00
Australia AUD 17:30 – 19:30 22:30 – 00:30
Important Central Bank Announcements
Central bank meetings and announcements have the potential to send shockwaves through the
Forex market. Fortunately, many Forex calendars also include the times when important central
bank meetings are scheduled. This becomes very important when a central bank, such as the
Fed, discusses changes to their monetary policy.
Rate hikes and cuts always have a long-lasting impact on currencies, and while many changes
to the monetary policy are often already discounted by the market, the central bank’s statement
and minutes of meeting can shed new light on future monetary decisions which again have a
large impact on the Forex market. That’s why you shouldn’t trade during important central
Don’t Chase the Market
Amateurs in trading often make the mistake to chase the market for tradeable setups, which
often results in overtrading and losing trades. If you had a few losing trades in the morning,
simply stop trading for the day. The market doesn’t owe you anything, and you’re letting your
emotions to interfere with your trading decisions by chasing the market to recover your losses.
Unfortunately, this trading behaviour usually leads to new losing trades.
Instead of overtrading, take a rest from your trading platform and go for a walk. Only relaxed
and emotionally-balanced traders can make the most out of their trading. Exhaustion, distrac-
tions and impatience lead to a stressed trading environment and costly mistakes.
You need to balance your trading and personal time to avoid becoming overwhelmed with
trading. Weekends are generally a great time to charge your batteries, since the market is closed
on Saturday and Sunday.
Don’t Open Trades During Illiquid Market Hours
While bank holidays take the liquidity out of the market, there are also certain market hours
whereby liquidity tends to fall. As a result, transaction costs rise and slippage eats into your
As mentioned, Forex is an OTC market which trades during Forex trading sessions. These
sessions span from New York in the United States, to London in the United Kingdom, to Tokyo
in Japan and Sydney in Australia. These four trading sessions are the most important in the
market, but not all four add the same amount of liquidity.
The London and New York sessions usually host the largest number of market participants and
have the highest liquidity, while Asian sessions tend to be considerably smaller in their size. If
you’re a day trader or scalper, you should avoid trading during Asian sessions, especially dur-
ing the beginning minutes of the Tokyo or Sydney sessions.
What’s the Best Time to Trade Forex?
Now that we’ve covered when not to trade, here’re the best times to trade the Forex market.
Forex traders live on volatility, which means that the best trade setups are usually found when
there’s enough volatility in the market. However, volatility can also work against you if the
price goes against your favour. That’s why we won’t trade during high impact news releases
despite the high volatility that they create, because we don’t know in which direction the market
Day traders will find the lowest transaction costs and largest price-moves during the overlap
of the New York and London sessions. The following table shows the open market hours of
each of the four major Forex trading sessions.
LOCAL TIME EST GMT
Sydney Open – 7:00 AM
Sydney Close – 4:00 PM
Tokyo Open – 9:00 AM
Tokyo Close – 6:00 PM
London Open – 8:00 AM
London Close – 4:00 PM
New York Open – 8:00 AM
New York Close – 5:00 PM
As the table above shows, the New York – London overlap begins at 1:00 PM GMT with the
NY open and ends at 4:00 PM GMT with the London close. Knowing this data can help you
identify the best trading environment to open your positions.
Sometimes staying on the sidelines is the best option
While the Forex market is a 24 hours a day, 5 days a week market, there are certain situations
when you should stay on the sideline. These include bank holiday hours, high impact news,
important central bank meetings and illiquid market hours. These events can exhaust the mar-
ket’s liquidity and make price-movements very unpredictable. They can also increase transac-
Use Forex calendars to help you spot and mark those events. This helps you take a rest from
your screen or use the time to learn new trading concepts. These systems will support your
trading performance once the market dust settles.
Phone: +44 (0)1428 738305
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