The forex market is open from Mon-Fri for retail traders. There have always been rumours and myths in the forums about traders not touching the markets on Friday. How much truth is there to these rumours? Should you actually avoid trading forex on Fridays? Let’s find out…
Trading forex on Fridays typically carries higher levels of risk than on other days of the week. If your trade is in a loss by market close, you will have to hold the position over the weekend. This leaves you at risk of your stop loss not being filled. There are also high volatility news events on Fridays, such as Non Farm Payroll.
Trading Forex On Fridays – A Good Idea?
If you’ve been in the forex community online for a few weeks, you’ll be familiar with the Friday trading myth. Forex traders seem to hate the idea of trading on Fridays. Some of the most well known traders in the industry say it’s the most volatile day, you are sure to lose money, etc… But is all this true?
Trading forex on Fridays is actually riskier than other days in the week. This is for 3 main reasons…
You may need to hold trades over the weekend.
Holding open forex trades over the weekend is risky. This is because the market is actually moving over the weekend but we don’t have access to trade it. Therefore, your stop losses won’t actually get filled.
Markets have been known to open 50 pips away from where they closed on Friday night. You’ll have to take that loss and there’s nothing you can do about it! For this reason, you want to avoid holding open trades over the weekend if given the choice.
Trading volume on Fridays is lower.
The institutions and trading firms are slowing down for the week by Friday. They’re starting to pack up shop and this means lower trading volume. Lower trading volume means that the markets are full of consolidation and price action theories usually don’t work as well.
Fridays have large trading news releases.
You maybe familiar with high impact news releases, such as NFP (Non Farm Payroll). For whatever reason, the high impact news releases do often fall on a Friday. This creates a very hard trading environment. Before a news release there are usually liquidity moves and consolidation. After a news release, there is usually some very rapid and violent price movements.
If Not Fridays, When Are The Best Days To Trade Forex?
So, Fridays probably aren’t the best day to trade the forex markets. That only leaves 4 days in a week to actually execute forex trades. With that being said, when would the best days be?
Well, Monday isn’t a great day. On Monday, the market is just starting to move after the weekend and there maybe market gaps that need to be filled. I’ve always found that my trading results on Monday aren’t great compared to other days in the week.
On Tuesday, Wednesday and Thursday, there is typically less consolidation and I usually find very clean price movements and this is much easier to trade. You also have the benefit of not being at the end of the week. By opening a trade on Wednesday, for instance, even if that trade is on the H1 time frame, there is a good chance that it can close before the weekend.
In general, forex trading is all about staying safe and managing your risk. The day of the week isn’t the biggest factor in determining success. I would recommend either backtesting your trading strategy, or using a trading journal like MyFxBook to document your success on various days of the week. I’m sure the results will surprise you!
On a related note, there are also months that you may want to avoid trading, due to many of the same reasons as avoiding Friday trading. If you’re interested, checkout the best months for forex trading.
I Want To Trade Forex On Friday – What Do I Do?
If you have your heart set on trading on a Friday, I’d recommend two different options. Firstly, you could trade the lower time frames. By trading the 5M, 30M or even the 1H, you can scalp the markets and you should be in and out of the trade fairly fast. This means that you won’t need to hold the trades overnight / over the weekend!
Secondly, you could backtest. Backtesting and simulating a forex trading strategy is probably the most important part of developing consistency within the markets. There are plenty of tools you can use to help in your backtesting journey!
In Summary – Can You Trade Forex On Friday?
In conclusion , trading forex on Fridays is unique, but not unique in a good way. The markets are more volatile and there are fewer traders active. To stay safe, it probably isn’t best to trade the markets on Friday. However, if you do want to take advantage of this day’s volatility, I would recommend using smaller time frames.
Friday is a great day to be at home with your family, not trading the markets.
Do you trade on Fridays? Let me know in the comments down below…