Trading Around Holidays, When Liquidity Disappears

[Fairman]

Trading Around Holidays, When Liquidity Disappears

Holidays change the market's rhythm. When major financial centers are closed, such as around Christmas, New Year, or national holidays, liquidity thins and price can behave unpredictably.

What to expect:

- Wider spreads
- Slower movement, with sudden spikes
- Fewer participants, leaving price more vulnerable to large orders
- Unreliable breakouts and sweeps
- Gaps at reopen

Risks:

1. Stops can be triggered by thin-market spikes.
2. Technical levels may behave less reliably.
3. News can have outsized effects when few participants are present.

How to handle it:

1. Check market holidays. Look for banking holiday calendars for the main currencies you trade.

2. Reduce risk or stay out. Many traders simply take time off during low-liquidity periods.

3. Use smaller positions. Wider stops need smaller sizes.

4. Avoid aggressive strategies. Scalping in thin markets can be costly.

5. Be wary of holding trades through holiday closures.

6. Use the time to review. Study your journal, backtest, or rest.

Not trading is a legitimate decision. Many professionals reduce activity during holiday periods.

Remember that opportunities are not evenly distributed through the year. Choose the times when the market works in your favor, and rest during the times it doesn't.

[Fairman]

Practical point. When only one major centre is closed, like a US holiday, the London session can still be decent, but the afternoon dies early. I've found it's better to finish my trading before the time New York would normally pick up rather than wait for activity that isn't coming. A UK bank holiday is different. Then the London morning is thin and EURUSD and GBPUSD can drift or spike oddly, so I'd either stay out or cut size and widen targets. Japanese holidays matter less for most of us in West Africa, unless you trade yen crosses in the early morning. Check which centre is closed before deciding how normal the day will be.

[Fairman]

A small thing I do: check the calendar a week ahead for holidays in the UK, US and Japan, and mark them. It stops me planning trades on days I'd normally be active but the market won't be. UK bank holidays are mostly Mondays, so the London open at 8am Lagos is thin and the real action starts with New York. US holidays like Thanksgiving make the afternoon very quiet. Japanese Golden Week in late April and early May thins the yen pairs. On those days I either skip trading or halve the size and expect breakouts to fail more often.