The WorstTrading Mistakes – Trading during wrong hours

Do you want to know more about how to avoid the worst trading mistakes? Watch our latest video and learn to avoid to trade during the wrong hours.

The Worst Trading Mistakes – Avoid the mistake of trading during wrong hours

A simple and common rookie level mistake would be trading during the wrong hours. What I mean by this is that some markets don’t necessarily have the liquidity during certain times of the day in comparison to others that is necessary to have an orderly or even fluid market. There are a multitude of markets like this, and I cannot tell you how many times this has cost somebody either money, or mental capital when it was completely unnecessary.

On this chart, I have the USD/CAD currency pair. While the US dollar and the Canadian dollar are both major currencies, 90% of the trading occurs either in later European hours, or while the North Americans are on board. This makes sense, because 85% of the foreign trade from Canada is to the United States, thereby limiting a lot of the volatility during Asian trading hours. Needless to say, this is not the only marketplace that we see this phenomenon, and some Forex brokers will limit the hours that you can trade specific currencies, with the Russian ruble being a prime example.

CFD traders make this mistake when they try to trade something like the Hang Seng during off hours. It makes sense that most of the movement in the Hong Kong stock exchange CFD is when the underlying exchange is open. That’s not to say that we can’t have a continuation of these off our moves, just that the liquidity issues cause major problems, and this of course can lead to false breakouts. The most common markets to see this issue with will be frontier currencies such as the South African Rand, the Malaysian Ringgit, and many others like that, but keep in mind even some of the larger stock markets can present the same issues depending on the time of day.