Holidays Are Coming, Keep The Stops Tight!
Skerdian Meta • 1 min read
Here we are, in the third week of July. Time flies when you´re trading forex, doesn´t it? Well, it does and some forex traders already left their desks for some hot places.
The holiday season is starting and a lot of the big boys take time off and cool off in exotic places, which reduces liquidity in financial markets, the forex market being no exception.
In fact, some of them might have left already because the market hasn´t behaved normally in the last couple of weeks. They sure can afford it.
Last week, the trading range was relatively tight in most forex majors until Friday when the data hit the USD hard. Yes, the market was waiting for Yellen and then for the inflation report to give the USD a direction, but some of the calm before the storm was an attribute of thin liquidity.
It's supposed to get worse in the upcoming weeks, particularly in August, or better if you are one of those traders who like to trade tight ranges.
Last August the range in EUR/USD and USD/JPY was around 300 pips, which is not bad compared to recent months, but if you compare it to the same period last year, then it looks very tight.
So, liquidity is drying up and the price action gets slower in such market condition, although don´t rule out big spikes because that´s what happens when there some big guy buying/selling a forex pair, with no one on the other side of the trade.
Therefore, we must keep our stops tight, since profit targets are not going to be that huge for a few weeks.