Weekend trading is the buying and selling of financial instruments like stocks, currencies, and commodities outside of regular market hours. Most exchanges close over the weekend, but some traders use this time to adjust their positions or get ready for the next trading week.
This article has looked into all the pros and cons concerning weekend trading. Trading on weekends can offer a chance for higher earnings because there is less competition during this time. Since liquidity tends to be lower on weekends compared to weekdays, it can lead to different trading opportunities. In the following sections, we will discuss the impacts and risks of this further.
What Markets to trade in during Weekends?
Since different markets and asset classes are involved, the trading hours are very different, which necessitates the need for an investor or trader to stay up to date. Also, following this pattern can be quite a complicated affair, but it would certainly make a difference to one if he or she ever plans on trading.
To sum up, at a glance, have a look at the stock market and forex market opening times. Moreover, note that liquidity and trading volume change both during the day and over weekends. Here are the best tips for weekend trading.
It’s not easy to give a universal suggestion for all the traders as each market is different from the other and every trader has his own favorite asset class and trading strategy for forex, commodities, or any instrument. .
Still, if one thinks about the opening hours, liquidity, and spreads, then it would rank the stock market, forex market, commodities market, and cryptocurrency market to give an idea to the trader to focus on the right effort.
Knowing these major factors allows a trader to make more informed decisions about where to trade during weekends, and therefore increase their opportunities for winning.
1. Cryptocurrency Market
Trading cryptocurrency is especially suitable on weekends as these markets run 24/7, allowing continuous access. While during this period, liquidity can be lower, there is still enough activity to make sure that spreads remain relatively small compared to other markets.
2. Forex Market
Forex is the world’s largest financial market that accounts for roughly about seven trillion dollars trade on an everyday basis, available 24 hours on any day of the five-day business week because everywhere around the globe, there must always be at least a single place or financial center that happens to be working at such times.
The market is open Sunday at 5 pm EST until 4 pm EST Friday when trading sessions from London, New York, and Tokyo drive the action.
Since no one follows every piece of data emanating from all currency markets; locating precise levels of liquidity is very difficult.
While much more liquid than the cryptocurrency market, nevertheless, forex trading will occur nowhere on weekends.
3. Commodities Market
Commodity markets, such as the New York Mercantile Exchange, generally work around the clock, however, some have shorter hours or close on weekends. This can confine traders’ ability to access the market. As a result, despite having trading hours comparable to forex markets, commodity markets often experience significantly lower liquidity.
>4. Stock Market
Official trading hours for the U.S. stock market are between 9:30 a.m. and 4:00 p.m. EST. The pre-market and after-hours sessions are few and the market is closed over the weekends.
Even so, the temptation to trade during those hours will often prove to be an unsound temptation, because low liquidity and wide spreads usually attract traders to other markets.
Most markets, except for cryptos, are not easy to trade on weekends because they have higher spreads, fees, and lower access levels. As such, any trader should know the specified trading hours, liquidity, and spreads for their targeted markets.
Trading Strategies for Weekend Trading
The following are some of the weekend trading strategies-
1. Natural Disasters & Unplanned Events
The latest studies have highlighted how unplanned events such as natural disasters, terrorist attacks, and the deaths of company executives affect the stock market. The research showcases that natural disasters have the most serious impact, while terrorist attacks have the least.
When a natural disaster happens, the stock index usually decreases on that day and continues to decline for the following two days. This has created opportunities for profit through short selling. In contrast, with events like terrorist attacks, the stock index usually falls only on the day of the event and the following day, also allowing for short-selling opportunities.
For executive deaths, the research indicates that these events negatively affect stock prices and returns.
These findings focus on the significance of being aware of the latest events and their possible effects on the stock market, along with the necessity of continuously keeping an eye on market conditions and trends.
2. News and Economic Indicators
Trading on weekends presents unique opportunities for investors to capitalize on global news and events that could influence market sentiment. By keeping an eye on crucial announcements and economic indicators like trade balances or decisions from the Federal Reserve during crises, traders can adjust their positions and potentially benefit from sudden price changes. Additionally, they can employ hedging strategies, such as options, to manage risk and take advantage of these unexpected price movements.
3. Earnings
A popular strategy these days involves leveraging pre-market insights to make savvy decisions about earnings reports. Powerful tech companies usually release their earnings after Wall Street closes. This allows traders to profit from how the market reacts to the news.
What are the benefits of Weekend Trading?
Forex, crypto, and other electronically traded markets now have extended trading hours, giving more flexibility to traders who can execute trades even beyond the traditional stock market hours. Trading on weekends offers some benefits, including a response to news in real-time, capitalizing on market gaps, and gaining from increased volatility.
With access to assets from early morning to late at night, traders can position themselves before Monday’s market opens. Cyclic platforms also make it feasible to produce strategies across different time zones. For day traders who rely on high volume and volatility, weekend trading permits them to keep operating even when weekday markets are closed.
Essentially, the extension of weekend trading hours through brokers for indices, forex, crypto, and equity CFDs offers traders more opportunities, flexibility, and a wider range of assets to manage.
Risks associated with Weekend Trading?
Weekend trading has made it increasingly hard for most of traders to trade on weekends because of low liquidity and higher risk. It has compelled the brokers to hire more staff and to widen their spreads, making it less attractive to trade during the weekends, thus having a potential chance of making losses. Consequently, this has made many avoid trading, especially when one says, “Never trust the weekends.”
The costs, probable loss, and absence of critical market participants can be risky in weekend trading. One would face the risk of a gap in the market if trade resumes on Monday morning and it is hard to acquire profits. Moreover, many traditional trading platforms don’t provide weekend trading or control it notably.
Conclusion
In conclusion, weekend trading can be very lucrative and exciting, where one gets an opportunity to make money even when the market is not so active. The article looks into which markets to pay attention to over the weekends, provides strategies for more success, and highlights risks that require caution. With better knowledge of the markets, strategies, and potential pitfalls, you can now trade smarter on weekends.