The end of the year is drawing to a close and, as usual, the markets are also preparing for it. The trade before and between the holidays may have different characteristics than normal. However, those who work full-time will want to devote themselves to trade during this time, as they will have more time to do so due to the vacation. Some binary options brokers offer trading on weekends - so trading is probably also possible on Christmas weekend.
The markets are usually rather calm these days. On a short-term basis, you could find markets that fluctuate sideways and trade range options. But in sideways phases not only range options can be traded, but also normal call or put options, because a sideways phase is defined by constant resistance and support.
How to trade a sideways phase
There are many ways to trade sideways. We present a simple one, using the RSI indicator as an auxiliary tool. First of all, you should always take into account that a sideways phase is almost never defined by perfect zones, so the course does not necessarily turn at the same course locations. This is what makes the course so volatile. For this reason too, we need the RSI indicator.
If we look at the lower chart, we can clearly see the fact. The price shoots across the upper resistance range of the sideways range a few times, but that doesn't mean that the sideways phase is over. Even more: If it is a false breakout and the price returns to the range, it is often accompanied by dynamic price movements, since stops are processed. You could theoretically build a strategy based on false breakouts.
Our strategy is simpler. In this case, we only trade call options. Our buy signals come when:
- the lower resistance has held.
- the RSI indicates strength.
- the second or third candle above the high the first closes.
In the case of all four identified signals (arrows), call options could be purchased. Since this chart is a 5-minute chart, a runtime between 15-60 minutes would have been conceivable. The circled area in the indicator is meant to indicate that the RSI did not confirm the rise in price here by strength and that this breakout should not be considered a false breakout. Shortly afterwards, the price continued to fall.
What else needs to be considered in the holiday trade
Trade is very thin during the holiday season - unless there are any decisions made by monetary politicians, If we think back, for example, to August 2015, which is usually the weakest month of the year, we can remember the decision by the Chinese central bank to depreciate the yuan against the US dollar. This has had far-reaching consequences for many markets, especially stocks. In summary, risks cannot be ruled out even in times of low sales.
But not only sideways phases, but also trends can develop in times of low sales. This is especially the case when market participants see the direction as generally clear. Institutional investors create more volatility and fluctuations in the markets. When they go on vacation, trends can also develop during the vacation season. One characteristic of such trends is that they move at a leisurely pace and less dynamically.
Profit from movements in currency
Conclusion - trading during the holiday season
Trading during the holiday season can also be very relaxed, since fluctuations are less run dynamically. You can rely on sideways phases as well as trends, but you should look beforehand whether the value was in a trend or in a sideways range before the holiday season and partly derive from this information which phase may be in the next few days.
For the trade itself, you look at the price and price action and then decide, for example, using indicators such as the RSI, whether a buy or sell signal is taking place.
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