Weekend Trading

Trading during the weekends gives investors a unique opportunity to enter the financial markets outside of traditional hours. Traders can hedge their weekday positions and monitor the market in preparation for the Monday Effect. Plus, since the blockchain boom, traders are no longer restricted to established spot currencies but have the option of trading hundreds of crypto tokens, too. This article will look at the advantages and disadvantages of weekend trading, strategies to implement and a step-by-step guide to getting started.

What Is Weekend Trading?

Most assets that are traded on exchanges have permitted trading hours. For example in forex, pairs can be traded 24 hours a day from Sunday evening to Friday. Outside of these hours, most exchanges are closed – but that doesn’t mean you cannot trade. Some brokers offer access to forex and indices markets on a Saturday and Sunday. This means that, if there is news on the weekend that will affect the markets, you don’t have to wait until the markets open on Sunday night to execute.

Brokers that offer weekend online trading usually do so by creating a distinct weekend asset. For example, GBP/USD will be closed, but ‘Weekend GBP/USD’ will be available to trade. Traders will not be able to alter their weekday positions but can use the weekend asset to hedge or increase position size. The broker will offer their prices based on underlying activity.

Pros Of Weekend Trading

Time To Plan

A stand-out advantage of weekend trading is that you’re able to analyse the markets at a slower pace. Many people work throughout the week so finding time to focus during this time can be difficult. Weekend trading allows time to maximise gains from existing positions, search for new trading opportunities or fine-tune strategies. If trading during the week hasn’t provided the returns you were expecting, the weekend is an opportunity to rectify this.

Crypto Focus

Cryptocurrencies are the asset of the moment and are perfect for those who can only trade on the weekend. While traditional markets are closed, crypto continues to move 24/7/365. Weekend trading allows for a laser focus on token trading, as one of the most liquid assets during this period.

Cons Of Weekend Trading

Fewer Assets

The key drawback of weekend trading is the reduced asset options. Cryptocurrency is the only market that is truly 24/7, making it a great option for weekend traders. But for those that prefer fiat currencies, stocks or indices, the market is limited. Futures and binary options investing is also limited.

Broker Availability

In the UK, not all brokers offer weekend trading on forex, CFDs and indices. In addition the list above, among the best platforms that do offer weekend trading are IG, 24option and FXCM. Other brokers may be open, but activity is restricted. For example, at Trading212, you can only place a limit order or a stop order.

Volatility

Many weekend markets are fairly illiquid. This decreased liquidity can lead to an increase in volatility. While volatility can create chances for profits, it also increases risk. The lack of liquidity can also result in wider spreads and greater costs for traders.

Weekend Trading Strategies

Closing Gaps

Gaps are jumps in the price of an asset. When a market shifts, this acts as a catalyst to a price jump, either to a higher or lower level, eliminating the prices in-between. Any number of things can cause these gaps, from new movements to accelerated ones. The one thing they require is considerable volume. However, because the big players are eliminated on the weekend, instead of these pricing jump gaps, you find closing gaps.

Closing gaps are different as they are created by just a few traders investing in the same place. When the market spikes and they don’t win out, they invest in the opposite direction, aiming to profit from their first error. This creates a gap.

There are two types of gaps: an upward gap and a downward gap:

• Upward gap – Traders sell their assets, the market falls and the gap closes
• Downward gap – Traders buy assets, the market rises and the gap closes

This creates a perfect weekend trading strategy as you know the gap will close so you have all the information needed to turn a profit on the forex market, for example. You know the price target – with downwards gaps it should rise to the low of your previous candlestick, with upwards gaps it should fall to the high of your initial candlestick. You also know the expiry, as the market should reach the target price within the next period.

This strategy is straightforward as long as you have your weekend trading charts on MetaTrader, for example. And, it can be easily applied to currencies and commodities.

Bollinger Bands

Bollinger bands emphasise a price channel that the market shouldn’t leave. On the weekends, this channel is especially precise, making it the perfect basis for your weekend trading strategy. These bands often yield the best result at the weekend, as the week’s news events and biggest traders can start their new actions.

To use Bollinger bands, you need to follow three steps:

1. Build your price chart with Bollinger bands
2. Wait for the market to approach your bands
3. Make your prediction about the position in which the market will turn

Weekend Trading Example

Trading on weekend markets means you can balance movements that impact your weekday position.

Suppose you have made losses in the week on an Indian share. Macroeconomic news is expected on Saturday morning which will affect the Bollinger bands, and so to offset your position you decide to open a short position, predicting that the market will turn. If your prediction is correct, you will offset a proportion of your weekday losses.

Guide To Weekend Trading

1. Learn What Impacts Price

Price movements on weekend markets are often a result of breaking news or macroeconomic events. In particular, forex pairs and indices are heavily influenced by political events including intergovernmental organisation summits and national political occasions.

2. Choose Your Weekend Strategy

Perhaps your aim is to use the weekend to manage the risk or your weekday trades. A  weekend risk management strategy means you can hedge your positions to improve the likelihood of profitability. Alternatively, you may choose to use the weekend to maximise the impact of news and current affairs on your bottom line. Whatever your strategy, it’s important to be clear on what you’re trying to achieve.

3. Open Your Position

Open an account with a broker that offers weekend trading. Select your asset and place your position. If you’re new to trading, it’s a good idea to try any weekend strategies on a demo account beforehand.

Conclusion

In this article, we’ve covered the key aspects of weekend trading. For some, it is the perfect opportunity to get involved with markets that are out of hours, unlike the traditional markets which close at the end of each week.

Weekend trading is suited to those who don’t have time during working hours and are willing to hedge on more volatile investments. The ‘closing the gap’ strategy allows people to benefit from forex weekend trading hours and maximise their profits when they might have lost out from the weekday trading hours. But ultimately, the primary benefit of weekend trading is that it allows people to research and respond to macroeconomic events that will help their trading decisions in the week ahead.

Note, currency traders should see our forex weekend trading guide.

FAQs