Trade Stock Indices

When Not to Trade Indices

There are times when you should not trade Indices because at these times the 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 fundamental news data 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 economic fundamental news can really move the trading prices, sometimes causing a spike in both directions, before moving 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 thence not a good idea to trade during news hours.

Some major economic/fundamental news like the NFP and Interest Rate decision can cause extreme volatility which is extremely hard to trade and can cause extreme movements on markets within seconds.

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

  • Weekends

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

  • Market closing times- NY closing

At the close time a No. of trade positions 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 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 transact during Holidays. This is because the Banks are closed & therefore less participants in the market. If banks close for a holiday then the volume of trade 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 and traders can keep updated: Example of a Financial Economic Data Calendar.

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