Ho Ho Ho its Christmas again! In this article, am going to answer a long-term question that many people do ask “how to trade forex during the month of December?” We can all agree that not all days are meant for trading, there are some days that the market is just very calm and barely moves while there are some days too which the market move so fast that if your risk is not well-managed can blow off your account or hunt your stop-loss as some would say.
There are also days which are public holidays in some part of the world which will result to thin liquidity in the market, which ever market you find yourself do not panic as there is a reason to it.
During the month of December, liquidity in the market usually have two outcomes which can be either a high liquidity or a low liquidity depending on the driving force (news and events) we can never be certain for sure.
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Also I decided to add this piece of information to this article.
“When we analyse the market we do not dictate the direction the market will move we simply try to find/predict/calculate the direction using [mathematical] models or strategy. Note that no one can truly say for sure what the future hold, as the future is a product of the present and past”.
The first two weeks in the month of December will be like any normal trading day in the market, there will be highs, lows maybe ranging market or opportunity to place trades and make profits, so I am not going to tell you not to trade as most would say but would advise you follow your trading plan closely.
After the first two to three weeks, we might start seeing a decline in the volatility and liquidity in the forex market this is because of the Christmas holiday that is fast approaching; we will look into why these things happen in the market.
Everyone Wants To Stay With Their Family
The Christmas holiday is one of the most celebrated holidays in the world as such most countries wants to join the celebration train. Business men, investors, hedge fund managers, bankers etc. will want to spend this period with their family, friends and love ones/wish wishers and not in an office shackled with computers and papers.
I too also spend my Christmas with my friends and family this help to build bond and make it stronger and also relieve stress.
Santa Claus Rally
Santa Claus rally is just a term I coin out to express what happens few days before Christmas. Few days before Christmas, we experience a high rate of shopping, traveling, hotel reservation etc. during this time the market start to lose liquidity as major players in the market start to take their leave as such they close their open position or reduce their volume and risk exposure in the market to have fun, travel and enjoy their vacation – who wouldn’t want such.
In summary, most banks present there balance sheet at the end of the year, with one of the major players in the forex market busy calculating its profit and loss and other big fund managers doing the same. So the market is partially empty, and left to the fate of retail traders to go wild.
So How Does One Stay Safe During This Month While Trading?
Despite trading in the month of December might be a bit tricky, it doesn’t mean you should stay out of the market totally. As I had earlier suggest, the first two weeks can be really lovely if you know how to play your cards right. One of the reasons why people tend to lose in this month is because they are addicted to trading; they spend most of their free time chasing after trades and usually end up getting their finger burnt.
After certain trades, traders should stay of the market, even if the market offers a good trading opportunity. Being able to “hold onto your decision and say a big NO, I won’t trade again is what I tag SELF DISCIPLINE” this is a good-trading characteristics that most traders lack.
Also, do not get greedy, the best trade in the market comes to those who wait and plan their trade set up.
Have a merry Christmas and a prosperous new year
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