There is always a question of timing when it comes to trade Forex. The market behaves differently at various times of the week, of the day, and of the year. Basically, you always want to trade when the market is as predictable as it can be.
Well, we’re entering the worst time of the year to trade Forex. Of that there is no doubt. December and the Holidays in particular are not the most predicatable times of the market so there is greater risk inherent in any trading activity.
Why is this the case?
There are a few reasons and they all converge together in December:
1. The holidays – A lot of financial institutions close their doors during the holidays. This means that there is a lower trading volume in the market than there normally is and you can expect a lower predictability as a result.
In addition, people just don’t have their minds on trading as much as they usually do. You will see a lot less trading and maybe some surprising moves by small and big players alike.
2. End of the year bookkeeping – It’s time for the accountants to step in and try to make the yearly reports as beautiful as they can. A lot of banks and institutions will do some creative things to paint the rosiest picture they can for their shareholders. This may lead to more unpredictable trading and expose you to risk.
Even proven and high probability methods may fail you during December, so you had better watch out for it.
Naturally, you can still trade and even earn big. But the risk will be greater. So, this can be a good time to take a vacation from the market, or just practice with a demo account. You can also brush up on your Forex trading skills in preparation for January and 2010.
