Friday Trading: What To Do When the Markets Close?

Filed under: Learn Forex Trading |

Friday trading is a little bit different to all of the other days in the week. Many people are looking to close trades. The reason for this is because once the forex markets close on a Friday night, you are leaving your stop losses open to risk. For example, you could have a stop loss at the 1.60 level on the GBP/USD pair, but on the open of the market on Monday, price could gap past your stop loss and leave you with a much bigger loss than you had planned for.

 

One way around this is to use guaranteed stop losses. But this eats up a little bit more of your profits in the long term, because you have to pay a little bit more for the privilege. So, many traders do not like to keep trades open at the weekend, and simply close them regardless of whether they are in a profit or a loss, and review the situation on Monday.

 

Personally, I do tend to leave my trades open. My theory is that the market could gap against you, but it could also gap in your favour – and in the long run, over a very long trading career, I believe there gaps in the market will even themselves out. It also does not happen as often as you might expect, and to date, I have never had the market gap past my stop loss.

 

However, the point of this article is to make you aware of what can happen when the markets close at the weekend. If a seismic news event happens over the weekend, then the markets will be severely rocked and you could stand to lose all of your trading capital. Therefore, it might be best not to hold your full trading capital in your trading bank, and instead, just put 20% or so in there to cover the margin for any trades. Then, if something catastrophic did happen, your maximum risk level would only be 20%. We must protect our trading capital at all times, and this is an extra safety precaution that you can take.

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