Trade Stock Indices

When Not to Trade Indices

There are times when you shouldn't trade Indexes because the market doesn't have enough activity and is unpredictable then. Not enough activity means fewer traders are participating when you compare it to normal times. These are the times when you shouldn't trade:

  • News Time

Scheduled fundamental news reports come out many times each month. You can find them ahead of time on an Index Calendar.

News comes in three types: yellow, orange, and red. Each brings different force. Strong economic news shifts trading prices hard. It might jump both up and down at first. Then it heads one way. These periods carry big risks. Plenty of traders face stop-outs.

But, it's not just the announcements themselves that can have an effect on the trading market. What people think and say about what the numbers will be can make trading prices change early. So, it's not smart to trade when news is happening.

Big news like NFP or rate calls spike volatility. Markets swing wild in seconds, tough to trade.

Economic data can lead to significant speculation and thus considerable price fluctuations.

  • Weekends

Weekends bring changes that open markets with gaps. This hits your account hard.

  • Market closing times- NY closing

As the trading session concludes, a number of open positions are either liquidated or rolled over. This activity injects volatility into market prices, potentially causing erratic price movements.

  • Asian Market

During the Asian market session volumes are very low and the trading market oscillates and moves in a trading range of about 20 to 30 pips and it becomes very hard to trade because the market falls flat. Unless you're trading JPY and AUD instruments it's best not to trade at this time.

  • Holidays

Don't trade during holidays. Banks are closed, so there are fewer people in the market. With banks shut, trading volume drops, which means lower price volatility.

Holidays like Christmas & new year traders shouldn't trade on these days & should take time off during the week of Christmas upto new year, date 2 when banks resume their operations. An Economic Calendar will include a schedule of bank holidays and traders can keep updated: Example of a Financial Economic Data Calendar.

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