This article looks at when you should not trade the foreign exchange rates.
When you trade the foreign exchange rates you will be told that you have to be patient and wait for the right time to trade. While it is important that you know when you should trade you should also know about when you should not be trading. Knowing about these times is important because it can ensure that you know when you should be trading. There are a number of points that you should look at when you determine when not to trade the foreign exchange rates.
Why Not Trading is Important
Knowing when not to trade is not only important in determining when you should be trading, but also in protecting your trading account. There are times when you are within the trading hours when you should not actually be trading. This occurs because of the ever changing nature of the forex market. By knowing when you should not trade you are able to determine the conditions that are right for your trading strategy.
Knowing Your Foreign Exchange Rates
The first point that you should look at when you consider when not to trade is the currency pair that you are trading. There are many strategies that tell you which currency pair you should be trading with. If you are not using one of these strategies then you would have looked for the currency pair that offers the movements that your strategy works on. The movements of the currency pair are very important to the successful of your trading. If you are getting the incorrect movements then your strategy is not going to work correctly.
There are certain times of the day, days of the week and times of year when certain currency pairs have the best movement. You have to consider all of this when you look at when not to trade. If you are trading in the times when your currency pair does well then you are going to be more successful with the strategy. However, if you are trading at the wrong time then you will suffer limited liquidity and poor returns on the market.
Knowing Your Forex Trading Strategy
The strategy that you use should also be considered when you look at when not to trade. All strategies work in certain market conditions. There are very few strategies that will be able to trade in range and trend markets. You need to determine which conditions your trading strategy requires. There are certain times of the day when certain conditions are more likely for the currency pairs.
If you are using a trend strategy then you should consider trading at the market session overlap. When you trade during this time you are going to get the most volatile and liquid conditions for certain currency pairs. It is important that you combine the information about the currency pairs with the information about the strategy to ensure that you are trading at the best times.
There are a lot of points that you should look at when you try and determine when not to trade. Two of the most important points are the currency pairs you are trading and the strategy that you are using.