A Forex market participant must consider a lot of factors and events before making any decision. There is a necessity to be aware of the factors that affect the movements of the Foreign exchange market.
Holidays should not be considered as separate and irrelevant to the Forex market. It has a direct influence on the market that can affect your profitability.
During the holidays, the scene at the market is not as intense as during regular trading days. But the question is, why?
Let’s take a look at the major participants of the Forex market. These giant players are commercial and investment banks, which, as we all know, close during holidays. This results in weakened cash flow and a drop at the market’s liquidity.
Aside from public holidays, weekends also cool down the activities in the Forex market. The currency instruments that are traded off during these days are only the major ones.
With this snail-like pace during weekends and holiday season, it may lead to a decreased risk. Risk, as every participant in the Forex market knows, has a direct connection with invested capital. But traders with the knowledge of fundamental analysis, which is an in-depth and comprehensive study of the market, can expect to earn well during these “drought” days.
Post-Holiday Events
With holidays and weekends are already taken into consideration, investors should also be prepared and on-guard with this one more factor: post-holiday events
The ‘earth-shaking news’ and announcements often come after the holidays. This news, from business, government or other entities has the potential to turn into a crisis that can affect the Forex market.
Now that you know one of the biggest influencers of the market, you’re all set to prepare for these things and be more equipped.
Also read: Forex Market Timing: When Not to Trade