Spot forex traders have a big advantage over other types of trading, but are you making the most of it?
We can do well when we play to our strengths. As a spot forex trader we have a very real time advantage. Many forex traders don’t make use of it and self-impose restrictions to limit themselves. In some cases that may work fine, however there’s the ability to think and trade broadly to make the most of the freedom forex trading can offer.
By way of comparison we’ll stop by and take a look at share market and options trading as contrasting examples.
Share Market Trading
Imagine you’re trading stocks in New Zealand on the NZX. The market is now closed and it’s time for a peaceful night’s sleep. While you’re sleeping and totally unaware, a shocking unimaginable disaster occurs and the Twin Towers are hit and fall. Aside from the total devastation and sickening loss of life that no words can sufficiently describe, shock waves are sent around the world and global markets react with force and violence.
When you wake in the morning to the horror, through the shock you realise the whole NZX is going to open massively down and much lower than where your maximum risk point is. You can only stand by and wait while your wealth shrinks.
The share market closes everyday and over the weekend. While it’s closed you can’t protect yourself and are fully exposed to market shocks outside of opening hours.
Binary Options Trading
You’ve done your analysis and you’re of the firm view that the market is very bullish. So you take a long EURUSD binary options contract out where you will win if the market finishes up at the end of the session.
The market is humming along and then it goes quiet. It turns out to be a quiet non-moving session and finishes slightly down on where you entered, but nothing really happened.
Shortly after the session ends the move you predicted initiates and takes off. You were right, but time ran out on you. There’s no room for being patient.
Options trading has a time expiry. Not only do you need to get the direction right to make money, but it needs to move within a pre-defined time.
Spot Forex Trading
In contrast spot forex has continuous trading 24/5, except for a few minutes each day when there’s a halt at 5pm US on weekdays, coinciding with the settlement of rollover interest. You’re only fully exposed to severe market shocks over the weekend.
You can put your stop losses and profit targets in the market with the expectation that the market will most likely trade through them in an orderly fashion, giving you at or very near the price you asked for.
Monday to Friday is just like one big day of continuous trading. A single Japanese candlestick of it’s own. You’ve got plenty of time to wait for your move to happen.
Spot Forex Market Time Advantages
• The forex market only closes for the weekend.
• The main trading sessions around the world run into each other and overlap providing strong liquidity.
• There’s no rush to exit a forex trade by session end, so there’s the ability to be patient and creative in our forex trading system design without these time constraints.
Are You Making The Most Of It?
Are you using forex trading strategies that take advantage of continuous trading opportunities? Are you self-imposing restrictions on your forex trading that don’t let you make the most of the time advantage?
I challenge you to be creative and work to the forex trading strengths available to you. Take advantage of time.
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About the Author: I’m Rachel Hunter, TraderRach, a Forex Trader who helps traders achieve the life they love with forex. Be strategic and design your trading business for sustainable success and have fun! That’s my mission. Join many traders’ gaining the edge with “10 Powerful Lessons for Forex Trading Success” plus other goodies. Years of precious learning specially packaged up for you. My background before trading is as a Chartered Accountant and Chief Financial Officer. I know what it takes to make a trading business rock on. It would give me great pleasure to make a difference to your success.