Trade Stock Indices

When Not to Trade Indices

There are times when you should not trade Indices because at these times the trading market becomes illiquid & unpredictable. Illiquid means that there are fewer traders compared and analyzed to other regular times. The times when not to trade the markets are:

  • News Time

Scheduled economic news reports are announced throughout many times of the month. These can be found, in advance on a Index Calendar

There are 3 categories of news; yellow, orange and red, each category having a different impact. High impact fundamental news can really move the trading prices, sometimes causing a spike in both directions, before heading towards one direction. These are high risk times where a lot of people get stopped out.

However, it is not just the announcements themselves that can affect the trading market. The sentiments and predictions of what the numbers and figures will be can cause the trading prices to move in anticipation. It is therefore not a good idea to trade during news hours.

Some major economic news like the NFP and Interest Rate decision can cause extreme volatility which's extremely hard to trade & can cause extreme movements in markets within seconds.

Economic data can cause a lot of speculation & therefore a lot of price movement.

  • Weekends

A lot can happen over the weekend leading to the trading market opening with a large gap. This can cause a big difference in your account.

  • Market closing times- NY closing

At the close time a number of trades are being closed or being swapped. This will lead to volatility in the trading prices and can cause the price to move erratically.

  • Asian Market

During the Asian 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 are trading JPY and AUD instruments it is best not to trade at this time.

  • Holidays

Don't transact during Holidays. This is because the Banks are closed & therefore less participants in the trading market. If banks close for a holiday then the volume of transactions carried out is greatly reduced. This can lead to low 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 & traders can keep updated: Example of a Financial Economic Calendar.

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