Trading in Forex is both an exciting and daunting prospect because your fate could turn on a dime if you’re not careful with how you go about trying to make your trades. Since you can never be absolutely sure that you’re going to find success in this field, it’s generally a good idea to start out with as much information about the do’s and don’ts as you can get hold of, and this includes making up your mind about whether it’s a good idea to trade in the summer.
Forex Lore and Summer Trading
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There are certain times in the year when the experts would say that it is inadvisable to trade, and while some of these periods are pretty obvious, others might just surprise you. Summer in particular is a time that many traders debate about; while some don’t believe it’s a good time to trade, others see the exciting opportunities available during these periods.
According to Mike Kulej;
Forex lore claims that summer is not a desirable time to trade currencies.
When a person spends enough time in the financial markets, they will quickly come to realize that these do go through seasonal changes, but when a trader is prepared for these changes, they can actually use them to their advantage. While some people might struggle to notice these changes, there are actually people who have used it to their advantage by turning the trend into a science that can be investigated and utilized.
Noticing the Seasonal Changes
In order to use the seasonal changes to your advantage, you will first need to look out for them and start recognizing the patterns that they form. Mike Kulej believes that they are most clearly visible when it comes to the physical commodities markets; something that just about anyone can see when it comes to foodstuffs such as grain, because this tends to be much more plentiful during the summer. When certain demands are higher, such as the need for natural gas, this tends to become more expensive. Common sense plays a big role in determining the seasonal fluctuations, and so many traders tend to stick to this when it comes to trying to identify some of the more common trends.
Summer Time Breaks
The summer isn’t only a period for harvesting; it is also the time when schools and businesses go on their “summer breaks”. Businesses might not have a set break, but they do tend to have higher levels of inactivity, particularly in the government sectors, and this means that it can be difficult to make those all-important trades. Many people refer to this period as the summer slowdown, and it occurs because professionals use the period to go on breaks, and this includes those individuals who place orders for financial institutions. It is often the larger corporations that make most of the impact on Forex, which is why their absence leaves a noticeable hole in the industry.
Does this mean that people should stay away from the market altogether until the weather starts to cool? Certainly not, claims the experts at eToro;
market that is thin on liquidity does not necessarily mean that it is also less on profits if a successful trade is concluded.
The trick to make money during these times is to spot those trends that will lead to the larger profits; traders just need to lie in wait for those perfect opportunities and snap them up when they come along.
While other traders might be relaxing and enjoying the warm weather, pristine beaches and general merriment that this time of year boasts, those who are willing to stick it out can actually make this period a very profitable one, if they know how to go about this. Remember; this isn’t just the opportunity to snap up great trades, but it’s also a great time to try out some strategies and generally prepare for the challenges that will arrive along with the fall when the market gets more aggressive.
When Not To Trade
There are certain periods where it is just not a good idea to trade, and this includes bank holidays, both in the UK and the U.S. Since banks happen to be the biggest players in the Forex market, when they’re closed, it’s generally not a good idea to get onto the floor. According to the experts at forex4noobs.com;
If they are on holiday then the volume of transactions being carried out is greatly reduced. This can lead to either really static markets or on occasion, erratic markets. Either way it does not follow the normal pattern, so I stay clear.
Of course most traders want to make sure that they are trading in a market that is as predictable and stable as possible, but a trader is rarely given a heads-up to let them know that the market is going to be unpredictable. Since the UK and U.S. are home to some of the most powerful banks in the world, when they’re closed for business, it’s a good idea to put up your feet and take the day off. Keep in mind that it isn’t just these banks that are going to have an effect on someone’s trades; when banks are closed in other countries, such as Australia or Japan, it’s not a good idea to trade in those currencies either.
The Many Influences on Forex
Forex is affected by so many different factors that eventually people need to learn to keep their eyes on just about every possible influencing facet, including the seasons. While it might seem a bit ridiculous having to keep your eyes open for warm weather in order to determine whether the market is going to be busy or not, it is advice like this that will help turn an ordinary novice into an experienced trader. At the end of the day, summertime can either be a period of rest and relaxation or a period of opportunity; it is up to each individual trader to decide.
