Weekend trading (2024)

FAQs

Is weekend trading worth it? ›

Key Takeaways

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.

Stay involved in the markets: Even though the markets are closed, you can still stay involved by following the news and reading financial publications. This will help you stay up-to-date on market developments and will make it easier to get back into the swing of things on Monday.

The so-called first rule of day trading is never to hold onto a position when the market closes for the day. Win or lose, sell out. Most day traders make it a rule never to hold a losing position overnight in the hope that part or all of the losses can be recouped.

There are four different types of gaps: common gaps, breakaway gaps, runaway gaps, and exhaustion gaps; each with its own signal to traders. Gaps are easy to spot, but determining the type of gap is much harder to figure out.

A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.

It is not a hard and fast rule, but rather a guideline that has been observed by many traders over the years. The logic behind this rule is that if the market has not reversed by 11 am EST, it is less likely to experience a significant trend reversal during the remainder of the trading day.

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.

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.

The vast majority of day traders are unprofitable, and many traders persist in trading for years despite their losses. It is estimated that 80% of day traders quit within the first two years, and nearly 40% quit within one month. After three years, only 13% remain, and after five years, only 7% remain.

Gaps in stocks occur when a stock's price jumps suddenly between two candlesticks, leaving behind a vertical gap in a chart. These gaps typically occur in response to after-hours news, but they can also result from a spurt of increased trading in the middle of a larger trend. Gaps often fill, but they don't have to.

How to know if a stock will gap up? ›

If the earnings for the previous quarter had significantly increased and were much better than expected, the stock price may Gap up. And conversely, if the company reported disappointing earnings, this may cause the price to Gap down at the opening of trading.

For an up gap to form, the low price after the market closes must be higher than the high price of the previous day. Up gaps are generally considered bullish. A down gap is the opposite of an up gap; the high price after the market closes must be lower than the low price of the previous day.

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.

In short, holding stocks over weekends gives low and perhaps negative returns, but also provides relatively low risk. The volatility of stock returns over weekends is much smaller than could be predicted from intraweek volatility.

If the price is very close to your profit objective, close before the weekend. Taking most of the profit on a trade is better than taking on the risk of holding through a weekend. Never hold a trade through the weekend just for the sake of holding it.

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.