- Late Sunday/early Monday
Looking at the worst time to trade forex, there is nothing more slumber-inducing than the late Sunday/early Monday crossover. During this time everything remains slow and in many ways functions as a reassessment period, with many using the crossover to plan for the week ahead instead of actively trading. The larger percentage of investors avoid making trades as the new week dawns, so it’s fair to say that you should do the same.
- National holidays
National holidays are unavoidable, but the free time you have on these days isn’t something that you should translate into trading activity. Banks are one of the biggest influencers on the forex market, so their closure on holidays is a telling sign. When they’re not open and operating, the volume of forex transactions being carried out is greatly reduced. This can lead to a static market or erratic price behavior. Either way it does not follow the normal pattern, so it’s best to avoid trading altogether.
- During major news releases
The forex market is driven by financial reports, economic data, and political updates, with the temptation being to trade when these grip the market. While doing this may put you at the heart of action, unless you have a firm understanding of how to trade the news, it’s recommend that you stay away. Updates, data, and reports can have an unpredictable effect on the forex market, especially when news arrives unexpectedly. Track major news releases through a forex economic calendar, so you can stay ahead of what’s coming and not be caught out.
- During times of strange price action
There will be times when a forex pair throws up strange price action, without any notable rhyme or reason. Random moves may give the market an exciting feel, but what they generally make for is rocky trading terrain. This means that it can be extremely difficult to grasp what is causing such price shifts and the general market sentiment. For that reason, when strange price action occurs it’s best to wait out the storm until the bizarre market behavior concludes.
- Asian sessions when liquidity is lower, particularly near end-of-day crossover time
Low levels of liquidity, which plague Asian sessions, rightfully represent a red flag. The amount of resources traded during Asian market sessions is often very low, so the average pip movements are too low to cover the high spreads of the Asian currencies. This is especially true near the end-of-day rollover time.