Markets and trading conditions are often more complex than one can easily predict or guess the most dangerous times for trading. However, the social and economic behaviors of traders can be analyzed based on experience and long periods of observation of active markets worldwide. Based on this foundation, some experts and experienced individuals have expressed opinions about times when trading and hesitating can have undesirable consequences and losses.
Why is understanding the most dangerous times for trading important?
For those whose primary profession is trading and who must constantly monitor price fluctuations and changes in the market, especially in the forex market and similar spaces, they are constantly under high stress and pressure. They are extensively exposed to unforeseen events that could result in either positive or negative outcomes, from making substantial profits to completely destroying all their assets.
Continuous stress and high pressure lead to excessive fatigue, especially mentally and emotionally, for individuals. This places them in situations where they may make wrong and irreversible choices. Therefore, understanding the most dangerous times for trading is crucial for this group of people; hence, they must be able to engage in trading with maximum planning and precision in identifying the right trading times to achieve success.
Another reason why this issue should be considered important is that many active markets worldwide, such as the forex market, operate 24/7. This characteristic tempts individuals to enter them and engage in trading, which can lead to inappropriate entries at unsuitable hours and moments, significantly increasing the likelihood of errors and mistakes.
Understanding the most dangerous times for trading
Now is the time to identify the inappropriate and most dangerous times for trading. In the following, we’ll review some important perspectives on this matter and emphasize the recommendation that young or inexperienced traders should definitely seek assistance from these recommendations and apply them in their trading activities.
Trading after a successful deal is prohibited
Almost all professional experts and experienced individuals emphasize that after making a good, successful, and profitable deal, one should refrain from trading. There are scientific reasons for this warning. After a successful trade, we experience a good feeling, which is a sign of dopamine secretion in the brain. Under these conditions, the brain desires to experience this state again and produces more dopamine; therefore, it craves excitement, whether positive or negative. So, if we make a bad and loss-making deal, it satisfies our desire.
You might say this explanation does not prove that trading after a successful deal is dangerous. You’re right, but not with the point we’ll make. When dopamine is secreted after a successful deal, the brain believes that the market is not too risky or dangerous, and it analyzes the conditions much simpler, which creates a basis for the formation of risky and damaging trades. We hope this explanation shows you why we face one of the most dangerous times for trading after a successful deal.
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Stopping trading before or after the release of important news is crucial.
Traders know the power of significant news to influence markets and create substantial profits or losses for individuals.
Identifying or analyzing this news is by no means an easy task. Therefore, if you’re on the verge of a significant political or economic news release, or you become aware of impactful news, refrain from trading until the full extent of the news’s impact is evident. Then, trade with peace of mind and awareness of the prevailing market conditions.
This caution is because certain events and related news, such as decisions about interest rates, increases in wages, fluctuations in national currency values, or significant political decisions affecting the overall country’s conditions, can cause significant price fluctuations.
Avoid trading on the first and last days of the week
When the week starts and the market begins trading, trading activity picks up, revealing market conditions and intentions for the new days ahead. So, refrain from any trading on these days unless you’ve created a trading opportunity that requires your control and management.
The last day of the week is also a very inappropriate time for trading. It’s even worse than the first day of the week. Instead, focus on monitoring and analyzing news and market developments. Therefore, the middle days of the week are the best times for fruitful and pleasant trading experiences.
Refrain from trading when your mind is tired
Take this recommendation seriously and understand that one of the most dangerous times for trading is when you’re not in the trading mindset, feeling bored, heard bad news, unable to analyze, or have any other negative mood for whatever reason. In these situations, avoid opening any trade through any application or website to avoid making mistakes due to inadequate control and effective management of the situation, which may lead to irreparable financial losses.
Take your physical fatigue seriously as well. If you’re experiencing sleep deprivation, don’t rush. Rest assured that good and desirable opportunities will still arise for you. Prioritize rest, then get ready to engage in trading activities with renewed strength and sufficient energy.
In Conclusion
regardless of how successful and intelligent a trader you may be, there are times in the market when conditions are not suitable for successful trading. Therefore, it’s essential to know when trading opportunities are not available. Experts consider several situations as the most dangerous times for trading, some of which are: after a highly profitable and successful trade, before and after significant news releases, the first and last days of the week, and times when an individual lacks the mental and physical conditions and energy for registering and managing trades.
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By David Taha