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When & when not to trade


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Most of the information you will find when you begin your trading journey will be on how to best spot market opportunities and identify signals when they present themselves.

While, of course, that is extremely useful information, it could be argued that it is equally important to know when NOT to trade and to avoid the market all together.

Whether it be for a personal reason or due to macroeconomic events out of your control, there are certainly moments where you would be better waiting on the sidelines to trade another day.

Personal reasons to avoid trading

First of all let’s look at some times when you shouldn’t trade due to personal reasons. Some of these may seem obvious but you would be surprised how many people ignore these warning signs and blow away their entire trading capital.

Trading when highly stressed/ tired

If you are stressed/tired then you will not be performing at your best and your decision making will be sub par. It’s far better to take a rest and come back when you are feeling fresh again.

If you must do something to do with trading then it would be far better to use this time to study or to paper trade rather than using live funds.

During emotional times

Trading is no different to any other job that you may have in the real world. If you have some serious family issues or if you are under a lot of mental pressure then it would be better to take some time off.

If you ever feel like your emotions are getting the better of you then save the trading for another day.

Trading when surrounded by too many distractions

It’s essential that you are 100% focused when you are trading. You should always be monitoring your positions for how your trades are performing and how the market behaves. It’s hard to learn from the market if you are constantly distracted.

Trading after a heavy loss or during a continued losing streak

After a big loss there is no way you can trade with a clear head. Step away from the computer and come back another day when you have refocused and recovered from the loss.

It would be even better to analyse the trade to see what you did wrong so that you can avoid making a similar mistake in the future.

When you are at work

This ties in with a few of the aforementioned points. If you are at work you likely will not be able to focus and you will be distracted on multiple fronts. Also, we don’t want you to lose your job just yet! Wait until you’re bringing in the big bucks first.

Fundamental and technical reasons to avoid trading

The market reasons for not taking a trade are situations that are way out of your control.  Certain events have the potential to send shockwaves through the market, causing huge swings and periods of volatility.

Here are a few examples of such events. During these times, it’s almost always better so sit out and watch from the sidelines.

Large news events

News often plays a big role in the price fluctuations in the market. Some currencies are heavily tied to commodities while others will move depending on how their stock markets perform or sometimes even individual companies.

Keep one eye on the news and make sure you understand what impacts the currencies that you are trading.

Political elections results

This is one goes without saying. Keep an eye on key election dates as the price can fluctuate wildly based on election results.

High profile speeches and budget releases

High profile speeches and budget releases can affect the market considerably. Be aware of when they take place and wait for them to pass by so you can avoid the market uncertainty and resulting speculation.

Bank holidays

A large portion of the trading volume comes from the banks. When they are closed during the bank holiday it means the markets are far less liquid than usual. This can cause market stagnation and occasionally erratic price movements.

Market open/ close

It’s a good idea to try and avoid the market/open close as it can often bring increased volatility. Traders are frantically trying to open/close their positions which can cause erratic price movements.

A word on overtrading

As the markets are open 24 hours a day, five days a week, there are a huge number of opportunities for traders to take advantage of. This is both a blessing and a curse.

Overtrading is one of the major reasons why traders lose money. You should not be entering a position at every signal that you see. As the old saying goes, “good things come to those who wait.”

It pays to wait for clear cut setups where a number of your indicators are all pointing in the same direction. Stick to your trading plan religiously, don’t chase your losses, and keep your trading decisions as objective as possible.


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