Have you ever thought whether to keep a trade open over the weekend? If yes, was a decision like this always profitable for you? If not, maybe you should put off doubts and fears and try it? We have gathered the information you should know about keeping trades over the weekend.
Trading over the weekend is a big dilemma. On the one hand, you may suffer big losses, if the market is shocked by the unexpected news that you couldn’t take into consideration before weekends. On the other hand, you may close trading before the weekend and lose an opportunity to have a profitable trade. Imagine that after the weekend the price continues moving your way, but there is no longer point to enter this trade and as a good entry point is lost.
So, should you keep a trade open over the weekend? If you expect an accurate answer, you won’t find it here. There are many factors that you will have to take into consideration before keeping the trading open.
1. Timeframes
If you read our previous articles, you could notice that timeframes play an important role in different trading issues. And this case isn’t an exception.
If you are a long-term trader, you keep your positions open during weeks and months, this issue isn’t for you. Any temporary volatility won’t affect your trading. If you are a day trader, your trades last from several minutes to several hours, this question isn’t for you as well. You will consider keeping trades open over a weekend if you are a swing trader who has one trade last for up to several days.
To keep the trading over the weekend, be sure you trade on the right timeframe. H4, daily timeframes may provide you with this opportunity.
2. Risk/reward ratio
Always take into consideration the risk/reward ratio (how much you can afford to lose relative to your potential gain). The optimal risk/reward ratio is 1:3. It means that the potential profit is 3 times higher than the possible losses. Be sure that even if the trading will go against you after the weekend, you will have a safety mechanism in place.
Even if you don’t believe in fundamental analysis, it’s worth checking events that may happen on the weekend. If such important events as Brexit negotiations, Trump’s speeches, NAFTA negotiations, etc are planned on the weekend, it’s wise to think about closing the trades. You never know what news will be out and how the market will react to it.
4. Trading diary
Let’s imagine you tried keeping the trade open over the weekend and you lost. Is it a reason not to try it ever again? Of course not. Make a rule of recording your trades. By doing this, you will be able to track all your profits and losses. It will be easier for you to create your own trading strategy that will lead you to success.
5. Calmness
There’s one important thing that relates not to the market but to your personality. Imagine you have an open trade over the weekend, you don’t know what news might be released and what mood the market will have on Monday. Are you ready to be stressed over the weekend and wait in a sweat for Monday? If not, better save your nerves and start trading with a clear head on Monday morning. If you are self-confident and risky, trading over the weekend will be just another interesting challenge for you.
Consider your personal qualities and be sure the weekend won’t become a horror for you.
Making a conclusion, we can say that it’s only your decision whether to keep trades open over the weekend and either expect a bigger profit or stay calm and limit your possibilities. When this question comes to your mind, check all the points we mentioned above and your decision will become easier.
forex trading
education
forex education
Author: FBS Analyst Team
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Any temporary volatility won't affect your trading. If you are a day trader, your trades last from several minutes to several hours, this question isn't for you as well. You will consider keeping trades open over a weekend if you are a swing trader who has one trade last for up to several days.
Options lose value over the weekend just like they do on other days. Long weekends add even another day of depreciation due to time decay, which is measured by Theta. This means that a trader can have a very slight edge by selling options on Friday, only to buy them back the following Monday.
1 This means settlement takes place a day after the trade is initiated. So if you buy a stock on Tuesday, the trade settles on Wednesday. Weekends and holidays may affect the settlement date for stock transactions. In these cases, settlement takes place on the next business day.
Key weekend trading strategies include technical analysis, volatility tracking, and following news events that cause price movements. Benefits include flexibility to react to announcements in real-time, gap trading at market opens, and harnessing volatility.
The middle of the week typically shows the most movement, as the pip range widens for most of the major currency pairs. Saturdays and Sundays tend to be the least favourable days for trading forex. Most traders tend to avoid trading forex during holidays and around major news events.
The first, the “weekend drift effect,” is that stock prices tend to decline over weekends but rise during the trading week. Cross (1973) found that stock prices tend to decline over weekends in the three-day interval from Friday's close to Monday's close.
Without a doubt, it would suggest you exit the stock as soon as possible and before the markets get worse and you get nothing out of your stock. So you finally exit your stock at the current price.
In technical analysis, if a trend breaks down, it might be time to exit, regardless of the trade's value. Review the reasons for the trade. If the reasons no longer apply, even if the trade hasn't hit a profit or loss target, it may be time to reassess holding the trade in your portfolio.
For long positions, I like to hold my options for at least 100 days. This gives me plenty of time to ride out any market fluctuations and take advantage of any upward trends. For short positions, I usually hold for about 50 days. This allows me to capture profits quickly and move on to the next opportunity.
“T+1” trading prohibits buyers from selling the stocks they bought on the same day, so they require a discount. We estimate the “T+1” discount at 14 basis points. We show that the “T+1” trading rule contributes significantly to overnight return risk.
Now you know that Monday and Friday are bad days for trading and the latter is worse than the former. If you exclude Monday and Friday from your trading you will discover that the best trading setups emerge between Tuesday and Thursday.
Most index options, such as the SPX, NDX, and RUT, settle Friday morning but stop trading on Thursday afternoon (before the third Friday of the month).
For intraday traders and scalpers, I would highly recommend not to hold trades over the weekend. This is due to the potential price gaps when the market reopens. However, for swing traders and position traders, holding trades over the weekend is going to be crucial and extremely important to your success!
Day traders use any of a number of strategies, including swing trading, arbitrage, and trading news. They refine these strategies until they produce consistent profits and limit their losses. There also are some basic rules of day trading that are wise to follow: Pick your trading choices wisely.
The weekend, when the markets are mostly closed, offers traders an invaluable opportunity to step back, analyze, strategize, and engage in activities to enhance their trading performance.
While the possibility of trading stocks on the weekend presents unique opportunities, it's not a strategy that suits all investors. The higher volatility, lower liquidity, and potential risks associated with off-hours trading may discourage some investors.
The most common time frames are: Scalping (1-minute to 15-minutes): This is a short-term trading strategy where traders aim to make small profits by entering and exiting positions quickly. Day Trading (1-hour to 4-hours): Day traders hold their positions for a day or less, closing them before the market closes.
Introduction: My name is Van Hayes, I am a thankful, friendly, smiling, calm, powerful, fine, enthusiastic person who loves writing and wants to share my knowledge and understanding with you.
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