The Risk of Holding Trades Over The Weekend
It is true that whenever we are actively engaged in the markets via open positions, we are exposing ourselves (our capital) to risk.
Markets move in unpredictable ways, and if anyone tells you otherwise, either they are not in the markets long enough to get humbled by the markets, or they are trying to look heroic in front of others.
What about technical analysis, fundamental analysis and all that nerdy stuff you ask?
Well, those analyses can provide a slight edge to traders at best. Markets do repeat the patterns and cycles, but not every time. And when it does repeat, there are variations to the timing, volatility and various other aspects.
Not only are the markets wrapped in uncertainty, the movements can be wildly volatile and deadly as well. We have witnessed it through multiple flash crashes that happened in the past, black swan events etc.
The closest thing that we can experience more regularly is the volatile price movements after major news announcements or meetings such as FOMC and NFPs.
Just last friday, 6th of August, gold prices tanked right after NFP reports were being released. The figures came out better than expected, and it was good news for the dollar. Gold sold off, and prices continued lower and remained low during the rest of the trading session.
Everything was normal, a $40 dollar move after NFP.
But what happened next was abnormal. Well, not totally abnormal, just not something that we experience frequently.
Gold prices took a huge dive first thing Monday morning. Monday blues for gold traders.
Price plunged by more than $80 and it was a combined $120 move since NFP.
Imagine holding a long trade over the weekend, and you weren’t there when the market opened Monday morning.
Even if you have a stop loss in place, the market moved so quickly that the market order couldn’t be executed at your defined price. Instead, you took a huge slippage and your order was filled at the then best price, which is $20 lower than your initial stop loss.
Luckily, that was just a made up scenario. But I am pretty sure, someone, somewhere on earth experienced that.
However, the scenario above depicts one of the risks of holding trading positions over the weekend. Not only that, there could also be weekend gaps that are unfavourable for your positions.
You can utilise Alam Manager, one of the many smart trading tools provided by FXPIG to their clients.
Here is how Alarm Manager can make your trading life easier;
- Set up Alarm Manager by dragging it from the left Navigator panel onto the chart.
As shown by the yellow highlight below, I have set an alarm when gold’s price gets below 1750.
- When you click on the highlighted item, it will bring you to the window as shown below.
Here, you can adjust the parameters such as prices, and what sort of actions you want it to run once the alarm is triggered. For instance, I can set it as “Close All’’ and the tool will close all positions when triggered or send a notification to my email or Twitter.
To sum it up, trading is inherently risky. There is always risk whenever you put on a trade. However, there are additional risks that you have to incur when you decide to hold trades over the weekend.
Try out the Alarm Manager now! Just go to alchemymarkets.com and hop on their Live Chat. The experienced Customer Supports will be at your service within a minute.