The forex market officially closes on the 25th of December, in observance of Christmas Day. This closure continues through the 26th of December, recognised as a federal holiday for Boxing Day. Trading resumes on the 27th of December, but the market closes again on the 1st of January for the New Year celebration.
Despite these closures, the holiday season, in general, isn’t the most opportune time for forex trading. With many traders and financial institutions taking breaks, there’s a notable decrease in liquidity within the forex market. Typically, higher liquidity is preferred as it offers better prospects for significant profits. However, during holiday periods, with reduced trading activities, the market experiences a drop in liquidity, often leading to flat currency prices.
Forex brokers, aiming to protect their profits, adjust their strategies during these times of low liquidity and volatility. A common practice is the widening of the bid-ask spread during the holidays. This adjustment serves multiple purposes: it makes scalping more difficult and discourages traders from taking significant risks under unfavourable conditions. Additionally, it provides an extra security layer for brokers in the event of trades during these periods. It is essential for traders to familiarise themselves with their brokers’ holiday policies and trading schedules to anticipate changes in market conditions.
In summary, the forex market conditions during the Christmas and New Year period tend to be unfavourable for active trading. It is recommended that traders use this time for rest or to advance their trading knowledge. For those who do not celebrate Christmas or prefer to stay productive, this period can be an opportunity for studying, refining trading skills or simply relaxing. Once the market returns to its normal rhythm, traders can re-enter, potentially more refreshed and knowledgeable than before the holiday season.
Merry Christmas from Learn to Trade