In the world, the forex market is the largest financial market.

One of the reasons why the Forex market has such a large volume of trading is that it is an over-the-counter market that allows market participants, five days a week, to trade currencies around the clock.

In spite of its non-stop trading hours, however, there are certain conditions under which you should not exchange. They can increase the cost of your transaction, lead to high slippage, produce false breakouts and false signals, or simply lead to losing trades accumulating.

In this guide, we will discuss the circumstances in which you should stay away from trading and show you the best times for trading in the market.

When to not trade

Although the Forex market allows you to position trades around the clock, there are some circumstances during which you should remain on the sideline, Monday through Friday. The following lines describe some of the most significant events that can trigger erratic and volatile price changes.

Under these situations, strive to stop trading:

1) Bank Holidays

Many banks close their doors during bank holidays and don’t process market orders. Since the Forex market is an over-the-counter market in which banks play an extremely important role and are considered to be one of the major players in the market, bank holidays cause the overall trading volume, liquidity and price-move predictability to drop.

During bank holidays, you will see many currency pairs moving only modestly, and the lower liquidity will usually result in higher transaction costs through wider spreads. During bank holidays, there is not much to look for in the market if you are a day trader or scalper.

That being said, at the same time, not all banks shut down. Specific countries are associated with bank holidays. For example, there will generally be a lower trading volume of the British pound during a bank holiday in the United Kingdom. Likewise, a bank holiday in Australia or New Zealand will cause a drop in the Australian dollar and New Zealand dollar trading volumes.

You can follow a Forex calendar to know which currencies should be avoided during bank holidays, listing the dates and countries in which there are bank holidays.

2) High Impact News

During the release of high impact news, another situation when you want to avoid trading is. Again, to mark those days and times when countries release their high impact reports, a Forex calendar may be very helpful. Non-farm payrolls in the US are some examples of such reports. These are published on the first Friday of each month. These include preliminary GDP reports, inflation reports, reports on labor data and meetings of central banks.

Immediately after a high impact report is released, currencies tend to become very volatile, particularly if the actual number differs to a large extent from the expected number. For some currency pairs, moving hundreds of pips is not unusual, caused by the high trading momentum that occurs just seconds after the numbers are published.

Since we can’t understand what the actual number will be and how currency pairs will react, until the dust settles, the best trading decision we can make is to avoid trading at all. The following table shows typical times when developed countries release high impact reports.

3) Important Central Bank Announcement

There is the potential for central bank meetings and announcements to send shockwaves through the Forex market. Fortunately, the times when important central bank meetings are planned are also included in many Forex calendars. When a central bank, such as the Fed, discusses changes to their policy, this becomes very important.

Rate hikes and cuts always have a long-lasting effect on currencies, and while many changes in monetary policy are often already discounted by the market, the declarations and minutes of meetings of the central bank can shed new light on future monetary decisions that will once again have a major impact on the Forex market. That’s why, during important central bank meetings, you shouldn’t trade.

4) Don’t chase the market

Trading amateurs often make the mistake of chasing the market for tradable setups, which often leads to trades being overtraded and lost. If in the morning you’ve had a few losing trades, just stop trading for the day. By chasing the market to recover your losses, you’re letting your feelings interfere with your trading decisions. Unfortunately, this trading behavior usually leads to new losing trades.

Take a rest from your trading platform and go for a walk, instead of overtrading. Only relaxed traders who are emotionally balanced can make the most of their trading. A stressed trading environment and expensive errors result from exhaustion, distractions and impatience.

To avoid becoming overwhelmed with trading, you need to balance your trading and personal time. Since the market is closed on Saturday and Sunday, weekends are generally a great time to charge your batteries.

Sometimes staying sidelines is the best option

While 24 hours a day, 5 days a week, the forex market is a market, there are some cases where you can sit on the sideline. These include bank vacation hours, high-impact news, major central bank meetings, and illiquid market hours. These events will drain market liquidity and make the volatility in prices very unpredictable. They can also raise transaction costs.

Use Forex calendars to help you spot and mark those events. This makes it possible for you to take a break from the machine or use the opportunity to learn new trading concepts. These systems will help your trading efficiency after the market dust settles.