As the winter holidays are already around the corner, you should know exactly when to stop trading and close your trades, and when to resume.
In this article, you will learn how Christmas and New Year holidays affect the financial markets, how to trade it properly, and I will share with you my trading schedule.
Winter Holidays Impact
First, let's discuss how winter holidays influence the markets.
Winter holidays lead to a dramatic reduction in trading volumes.
Many traders and investors take vacations in that period.
Major financial institutions, banks, hedge funds often operate with reduced staffing and early closes or are completely closed for holidays.
All these factors inevitably lead to the diminished trading activity.
Look at the schedule of official banking holidays in many countries.
Since Tuesday 24th, the banks are officially closed in Europe, UK, USA and so on.
Fundamental Factors
But why should you care?
If you have free time, why can't you continue trading?
Even if you trade technical analysis, you should admit the fact the fundamentals are the main driver for significant price movements.
One of the major sources of high impact fundamentals is the economic news releases in the economic calendar.
Look at the economic calendar.
You can see that the last day of high impact news releases will be Friday, December 20th.
After that, the calendar is completely empty.
Volatility
The absence of impactful fundamentals will inevitably make the markets stagnate, making trading very boring.
Above is the EURUSD price chart with ATR technical indicator (the one that measure the market volatility).
We see a clear drop in volatility during a winter holiday season.
You can behold a similar pattern on Gold chart.
Politics
With the big politicians taking vacations during the holidays season,
we tend to see the local easing of geological tensions accompanied by a lack of significant foreign and domestic policy actions and announcements.
That's the US congressional calendar.
There are no sessions since December 23rd.
Costs of Trading
But there is one more reason why you should not trade during winter holidays.
The absence of big players on the market will decrease the overall trading volumes - the liquidity.
Lower liquidity will unavoidably increase the bid/ask spreads.
The widened spreads will make trading more costly, especially if you are scalping or day trading.
When to Start
And when should you resume trading?
It always depends on how actively the markets wake up after holidays.
The minimal starting day will be January 6th.
I usually do not trade this week and just watch how the markets starts moving.
I prefer to begin my trading year from Monday next week, the January 13th.
Holidays seasons will be the best period for you to do the back testing and learning.
Pick a trading strategy that you want to trade with in a new year and sacrifice your time to back test it on different instruments.
Learn important theory and various techniques, relax and prepare your self for a new trading season.
