Introduction.
If you're a forex trader, you know that there are times when the markets are closed or have very little volume. Bank Holidays are one of those instances where the trading volume is extremely low.
This article will help you understand bank holidays, how they affect forex traders and how to take advantage of them.
What Is a Bank Holiday?
A bank holiday is a day that banks are closed because of some kind of event or when the central bank of a country shuts down its banks. It can be caused by things like political unrest, natural disasters, or even just bad weather.
There are two types of bank holidays: public holidays and national holidays. Public holidays are observed on the same day across all countries, while national holidays vary depending on which country you're trading in.
How Does a Bank Holiday Affect Forex Traders?
There are two main effects of bank holidays on forex traders:
Lower trading volume
Higher volatility.
Higher volatility means you will see more extreme price swings than normal. This can cause some traders to lose money as they try to catch up with such large swings in price.
Lower trading volume is also fairly common during bank holidays because people are not able to access their accounts as easily due to the closure of the banks themselves. This can lead to more volatile trading conditions as traders scramble for orders that would normally fill during normal weekday hours (when most people have access).
How do I take advantage of bank holidays in forex?
Forex traders use bank holidays to take advantage of the financial markets being closed on these days by taking advantage of the increased volatility when they re-open. The volume increases so does the volatility but you can use this to you advantage and get a good payday.
You can also choose not to trade during the Bank Holiday making it a no-trading day thereby reducing the risk of loosing money which is a positive for any forex trader.
Conclusion.
It is important for all Forex traders to check the economic calendar so as to know when there will be a Bank holiday or not. Forex traders especially day traders rely on high volume sessions which can be hampered by the presence of a Bank holiday.
Remember to use proper risk management when trading to reduce possible losses during low volume sessions caused by a Bank holiday.
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