The Risks of Overnight Trading

Many Forex traders regularly engage in overnight trading. While you are free to do this, there are some risks that you need to be aware of. Here are the risks of overnight trading.

Lower Liquidity

When you are trading during times that are not peak market times, you will face lower liquidity with your trades. This means that it might take longer to get your orders filled. In the Forex market, you might need to get out of a trade immediately. When liquidity is low, this might delay how quickly you can get out of a trade and cause you to lose money.

Volatility

When you trade overnight, there is also a high likelihood that the currencies you trade will experience some volatility. Since there are fewer traders involved, it does not take as much for the price to move rapidly. Therefore, this could affect you negatively if you are betting against a price move.

Larger Spreads

During low periods of liquidity, you will also have to deal with larger spreads. The spread is the amount of money that you pay your broker in order to place a trade. When there are not many traders or liquidity providers available, spreads tend to become larger and cost you more money.

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