Do Professionals Avoid Trading FX On A Friday?

There is no reason to avoid trades on a Friday but holding trades over the weekend increases your risk. It's best to try and close your trades before the market closes on a Friday if possible.
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Giles Coghlan
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To Trade, Or Avoid Trading On A Friday

Here’s a question from Mike is, should you basically avoid trading FX on a Friday?

Well the first thing to say is, on a Friday the ranges of the major pairs are narrower than they are midweek. So the largest ranges during a week are on the Tuesday, the Wednesday and the Thursday and ranges do drop off towards the start and the end of the week. So does that mean you should avoid trading FX entirely? Well not necessarily.

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The first thing to say is that there is still some good movement in the European morning session and when the European and the US session are working together on a Friday before about four or 5 o’clock GMT time, there still is quite a lot of movement in the FX market. So it still can be considered legitimate for day trading on a Friday.

The only thing to be aware of, is that toward the end of the US session which is after the European close, about 5:30, 4:30 GMT time, you start to see volumes drift off. So it would be unwise to enter a new trade in the second half of the European session, as we’re approaching European close.

That would be not a very sensible move. So not to avoid trading on Friday necessarily, but be aware the later it gets on a Friday, the less volatility we’re going to see and the market tends to quieten down and ranges become more narrow.

So yes you can still trade on the Friday, but be aware that towards the end of the day, we see some narrowing.

The other thing to be aware of is that you also get a weekend risk. So you might think, well I want to trade a swing trade that’s gonna take two or three days, it can be unwise to enter on a Friday because of event risk.

So take, for instance at the moment, the coronavirus outbreak is really the main focus of the market and imagine you said to yourself, well I want to trade in Australian dollar, Japanese Yen swing trade as we’ve got here on the chart and imagine just for the sake of argument, that it’s a Friday.

It’s not a Friday, but imagine it was and you wanted to enter short here because you thought well the chances are we’re going to see some more coronavirus cases outbreak. So I’ll short at market and just have my stock riding above the high.

Now the risk holding into a weekend is that there is no FX markets open on the Saturday and the Sunday so you wouldn’t be able to alter your position. Say there was some news which said something like, coronavirus cure found.

Then the Australian dollar, Japanese yen pair would rocket to the upside and of course you wouldn’t be able to alter, adjust or exit your position. You just have to wait until the Sunday evening open and then you would see a large gap to the upside and you would take certainly more loss than you anticipated.

So that’s another risk of holding a position over the weekend. So should you avoid trading FX on a Friday?

No you shouldn’t avoid it. But you need to be aware there’s some particular vulnerabilities in FX trading on a Friday and by being aware of them, you can work your way around them to still take some trades which are worth taking on a Friday.

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THABO THITI
THABO THITI
April 18, 2020 7:42 am

Do you have a structural format for fundamental analysis which can help in following a specific order to analysis