I’ve seen here on babypips and other forums, where professional traders advice people not to trade on Mondays and Fridays, but I’ve never seen a single reason why. So I’m asking, why is it not advisable to trade on Mondays and Fridays???
I think that advising people not to trade forex at all on Mondays and Fridays is taking it a little too far.
But it’s probably fair to say that the majority of long-term, successful, pro traders do 90% of their trading on Tuesdays, Wednesdays and Thursdays, and maybe only 5% each on Mondays and Fridays.
Monday mornings and Friday afternoons are particularly worth avoiding.
The main reasons are that volumes are very low, and both TA-based and fundamental-based trading “signals” of whatever type you’re using are very likely to be less reliable at these times of the week.
So there’s something in it, but it can also be overstated.
Well it is not a carved-in-stone rule by any means. It rather depends on what kind of trading one does.
The main cause for this is the fact that it is the weekend and the forex markets are closed for 2 days.
Many traders are day trading or carry open positions for only 2-3 days. Usually these types of traders will close their positions on Friday to avoid the risk of open exposure to unexpected events occuring during the weekend. There are no stops active during the weekend because there is no market. The market will open on Monday wherever the market-makers think it should be and it could easily be well on the wrong side of any stop levels.
Longer term position traders will trade on any day whenever a significant price or situation arises, they are not concerned (so much) with carrying open positions through the weekend- but they are not necessarily trading on Fridays or Mondays anyway because their number of trades is very small and last a long time.
This means Friday trading can sometimes be dominated by closing and adjusting positions rather than new, directional trading and that can lead to erratic moves and, towards the close, thin, aimless markets and sometimes maybe wider spreads than normal.
In the same way, Monday openings and early hours may be erratic as the market tries to find areas of value, especially if there have been significant economic or geo-political events during the weekend. This can lead to some volatile price action, false breakouts and so on.
Generally, I don’t trade the London session on Mondays but I watch the NY session. And I usually finish my week in the Friday NY session but only to close out positions and not to enter anything new.
But every trader is different
Even if the volume is low on Monday morning and Friday evening, that is not enough reason not to trade cus, logically, you will still make some pips, even though it might be small. Low volume should not really be a problem or don’t you think so?
Firstly, Manxx (as usual) gave a much better and more helpful answer than mine and you should be more influenced by him than by me.
Secondly, I do think low volume is a problem, because the reliability of “trade entry signals” is roughly proportional to the volume underlying the chart patterns they create. (This is also why longer time-frame signals tend to be more reliable than short time-frame ones. People say you should avoid very fast charts because a lot of what you see is “noise”. I think the reason for that is that it’s based on low volumes. Just like Friday afternoon and Monday morning charts.)
If you look at the volume charts for forex FUTURES (no realistic or helpful ones are available for SPOT forex) you’ll see an enormous overall difference between typical volumes on Monday mornings/Friday afternoons and mid-week volumes. The same is true with spot forex, except you can’t see their volume charts to prove the point. (Spot forex brokers’ so-called “volume charts” show only their own volume, which is useless.)
I don’t like using the term “noise”, myself, but it’s another way of saying the same thing.
That was why I said it depends on what kind of trader you are.
The issue is not really about low volumes as such, there is always a price available and spread widening is most likely only in the early hours of Monday moring in the Far East and in the closing minutes of Friday in NY.
The problem is that price movements are more prone to be erratic and directionless (partly because of low volumes) and can jump up and down within a small range. It may still be possible to grab a few pips here and there but more likely one enters, for example, a long and sees 12 pips gain - only to see it then plunge back to -5 pips.
Some Mondays and Fridays actually end up being very good days. NFP Fridays can be very dramatic!
I don’t think this is such a big issue. Maybe we just are lazy and like a lay-in after a good weekend - and like to start them earlier than the real workers of the world!
I normally find myself agreeing with you on most things but I really have to disagree with you on that one, Charlie!
I agree with Manxx and Charlie…
I hold positions for a long time and accumulate carry interest (rollover/swap, whatever you want to call it), so the weekend-holding is of no concern…
My last trade lasted five weeks, and I am approaching two months on another trade.
Also, while direction/trend strength may be lower on Mondays and Fridays, I agree with previous posters that you can still make some good money on those days… It all depends on your system, approach, etc.
Great to hear from you @PipMeHappy!
I just posted my thoughts on another thread. Feel free to take a look.
In addition to my earlier thoughts, perhaps scalping or trading multiple pairs simultaneously with lesser lot size for minuscule gains per pair may be feasible on Monday.
Good to see you here again @alphahavoc!
I hope all is well with you and yours.
Agreed. On Monday’s, the market always repaces itself. Trading from Tuesday London into New York is best onto Friday New York. Of course, for day traders and scalpers.
Another reason could be that the highs and lows for the week are often made on Tuesdays and Thursdays.
Do you make good profits holding on for a long time?
Are the swap fees exp
It is a balance: the bigger the bet, the better the carry but also the more risk you will take if the trade goes against you.
Betting on a carry trade with a smaller amount means that it will be safer but it will take a long time for that carry to accrue, and even then you cannot know how far against you that currency pair could travel from your point of entry.
For short-term, bigger bets, carry interest is a nice profit booster or damage limitation; for longer-term, smaller bets, carry interest handling requires patience and planning.
It’s not about the day you trade, it’s all about the timing and execution.