Have you ever thought whether to keep a trade open over the weekend? If yes, was a decision like this always profitable for you? If not, maybe you should put off doubts and fears and try it? We have gathered the information you should know about keeping trades over the weekend.
Trading over the weekend is a big dilemma. On the one hand, you may suffer big losses, if the market is shocked by the unexpected news that you couldn’t take into consideration before weekends. On the other hand, you may close trading before the weekend and lose an opportunity to have a profitable trade. Imagine that after the weekend the price continues moving your way, but there is no longer point to enter this trade and as a good entry point is lost.
So, should you keep a trade open over the weekend? If you expect an accurate answer, you won’t find it here. There are many factors that you will have to take into consideration before keeping the trading open.
1. Timeframes
If you read our previous articles, you could notice that timeframes play an important role in different trading issues. And this case isn’t an exception.
If you are a long-term trader, you keep your positions open during weeks and months, this issue isn’t for you. Any temporary volatility won’t affect your trading. If you are a day trader, your trades last from several minutes to several hours, this question isn’t for you as well. You will consider keeping trades open over a weekend if you are a swing trader who has one trade last for up to several days.
To keep the trading over the weekend, be sure you trade on the right timeframe. H4, daily timeframes may provide you with this opportunity.
2. Risk/reward ratio
Always take into consideration the risk/reward ratio (how much you can afford to lose relative to your potential gain). The optimal risk/reward ratio is 1:3. It means that the potential profit is 3 times higher than the possible losses. Be sure that even if the trading will go against you after the weekend, you will have a safety mechanism in place.
Even if you don’t believe in fundamental analysis, it’s worth checking events that may happen on the weekend. If such important events as Brexit negotiations, Trump’s speeches, NAFTA negotiations, etc are planned on the weekend, it’s wise to think about closing the trades. You never know what news will be out and how the market will react to it.
4. Trading diary
Let’s imagine you tried keeping the trade open over the weekend and you lost. Is it a reason not to try it ever again? Of course not. Make a rule of recording your trades. By doing this, you will be able to track all your profits and losses. It will be easier for you to create your own trading strategy that will lead you to success.
5. Calmness
There’s one important thing that relates not to the market but to your personality. Imagine you have an open trade over the weekend, you don’t know what news might be released and what mood the market will have on Monday. Are you ready to be stressed over the weekend and wait in a sweat for Monday? If not, better save your nerves and start trading with a clear head on Monday morning. If you are self-confident and risky, trading over the weekend will be just another interesting challenge for you.
Consider your personal qualities and be sure the weekend won’t become a horror for you.
Making a conclusion, we can say that it’s only your decision whether to keep trades open over the weekend and either expect a bigger profit or stay calm and limit your possibilities. When this question comes to your mind, check all the points we mentioned above and your decision will become easier.
Any temporary volatility won't affect your trading. If you are a day trader, your trades last from several minutes to several hours, this question isn't for you as well. You will consider keeping trades open over a weekend if you are a swing trader who has one trade last for up to several days.
Options lose value over the weekend just like they do on other days. Long weekends add even another day of depreciation due to time decay, which is measured by Theta. This means that a trader can have a very slight edge by selling options on Friday, only to buy them back the following Monday.
Key weekend trading strategies include technical analysis, volatility tracking, and following news events that cause price movements. Benefits include flexibility to react to announcements in real-time, gap trading at market opens, and harnessing volatility.
Believe it or not, you can start forex day trading with $1,000 or even less. It requires mastering position sizing and managing risks, but if you navigate your way to success, the rewards can be significant.
Holding trades over the weekend is allowed only on Evaluation and Rapid accounts. However, if you are trading with an Accelerated account, you won't be able to hold trades over the weekend.
Any temporary volatility won't affect your trading. If you are a day trader, your trades last from several minutes to several hours, this question isn't for you as well. You will consider keeping trades open over a weekend if you are a swing trader who has one trade last for up to several days.
Upon expiration, an option has no time value and trades only for intrinsic value, if any. Pricing models take into account weekends, so options will tend to decay seven days over the course of five trading days.
As of May 28, 2024, stock transactions settle on a T+1 basis. 1 This means settlement takes place a day after the trade is initiated. So if you buy a stock on Tuesday, the trade settles on Wednesday. Weekends and holidays may affect the settlement date for stock transactions.
Additionally, because of the lack of liquidity, the bid-ask spreads can be wider during weekends. This could make buying or selling certain stocks more costly. Moreover, news and events that occur over the weekend can lead to unexpected market reactions on Monday, adding to the risk.
This timing translates to a recurrent low or negative average return from Friday to Monday in the stock market. Some theories that attempt to explain the weekend effect point to the tendency of companies to release bad news on a Friday after the markets close, which then depresses stock prices on Monday.
A common approach for new day traders is to start with a goal of $200 per day and work up to $800-$1000 over time. Small winners are better than home runs because it forces you to stay on your plan and use discipline. Sure, you'll hit a big winner every now and then, but consistency is the real key to day trading.
In summary, if you want to make a living from day trading, your odds are probably around 4% with adequate capital and investing multiple hours every day honing your method over six months or more (once you have a method to even work on).
Why Do I Have to Maintain Minimum Equity of $25,000? Day trading can be extremely risky—both for the day trader and for the brokerage firm that clears the day trader's transactions. Even if you end the day with no open positions, the trades you made while day trading most likely have not yet settled.
Under a one-day settlement rule (T+1), settlement occurs on the business day following the transaction date. Saturday, Sunday and public holidays are not market business days.
A day trade is when you purchase or short a security and then sell or cover the same security in the same day. Essentially, if you have a $5,000 account, you can only make three-day trades in any rolling five-day period.
For long positions, I like to hold my options for at least 100 days. This gives me plenty of time to ride out any market fluctuations and take advantage of any upward trends. For short positions, I usually hold for about 50 days. This allows me to capture profits quickly and move on to the next opportunity.
Holding an Overnight Position offers potential advantages, such as the opportunity for higher returns, especially in volatile markets and across different time zones. However, it also carries certain risks, including exposure to gap risk and the unpredictability of market conditions due to after-hours events.
First, the per day volatility of stock returns is lower over weekends than during intraweek trading, so much lower that the three-day volatility for an entire weekend is only slightly greater than the one-day intraweek volatility. Second, stock returns are negative over weekends.
When you buy options and hold it for a week you loose the time value in option premium. So the underlying strategy should negate this effect some how. Holding long options overnight is a BIG no unless otherwise you are very damn sure that the underlying will move in your favour that too with fast momentum.
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