Although a common perception of the currency market is that it never closes, at least in theory, it is very difficult to find any traders working on Sundays. A novice trader will also notice that trading activities have come to a halt as Forex brokers shut down their platforms on weekends. However, things are somewhat different, as we will explain in the following lines.
Top Forex Market Participants
In one of our previous articles (Who Trades Forex?) we mentioned that the main purpose of currency exchange is to facilitate trade and travel. We also indicated that institutional investors contribute about 93% of the total trading volume. This means that out of a total daily trading volume of $5 trillion, individual forex traders represent no more than $350 billion of this huge number. These numbers are also one of the main reasons why the currency market is closed over the weekend.
Why don't forex brokers prefer to trade on weekends
With the exception of the Middle East region, almost all over the world financial institutions close their doors on weekends. At least, the dealing desks of most banks are not working these days, which means that about $4.7 trillion of normal forex liquidity will not be available this weekend. Thus even if a retail forex broker wanted to allow trading via its platform, it would face two main problems. The first problem is that he will have to act as a market maker without any options to hedge against the risk, because the main counterparties (banks and major financial institutions) will not be available during that period. The second problem is that the brokerage firm will not be able to provide reasonable spreads due to the lack of liquidity. The size of the spread is inversely proportional to the available liquidity (the spread decreases when major market players compete for trades sent from the broker's clients).
Consequently, the broker will have to raise the spread significantly to compensate for the lack of liquidity and reduce the risk and act as a counter party to the deal (OANDA used to spread spreads of up to 20 pips when it was providing its clients with the possibility of trading during the weekend before it stopped providing this service later). Such a large increase in the spread will of course dampen the appetite of traders to work over the weekend. In addition, the brokerage company will incur additional costs related to the infrastructure (eg electricity, telecommunications, etc.) if its systems remain operating during the weekends. Ultimately, the brokerage firm will not get a profitable return from providing trading services over the weekend. Also, do not forget that the market may often open on a price gap, which will also cause heavy losses for the brokerage company. In other words, the poor return that does not justify the risk is the main driver that prompted almost all brokerages to take a break on Saturday and Sunday.
Is there another way to trade on the weekends?
In theory, any wealthy investor who is able to execute large trading volumes can negotiate with his broker so that he is allowed to place trades at the end of the week. But even if this opportunity is available, trading during this period will not be a wise decision due to the lack of liquidity and the high spread rates.
The downtime also allows forex brokers to perform maintenance on their systems (for example, InstaForex traders will notice that the company always disconnects from its platform for about two hours after midnight on Saturday GMT). In addition, professional traders who have the ability to predict the trend with a high degree of accuracy do not need to place their trades during the weekends, as they consider that it is better to wait until the opening of Monday's session to get a clearer understanding of the situation in the market. For beginners, the weekend is an opportunity to take a breather, evaluate performance and refine the strategy so they can start in a better state of mind with the market open on Monday.
Even though the traditional currency markets are closed on weekends, you can still trade cryptocurrencies on Saturdays and Sundays through brokerages that offer such a service.