Weekend trading is one of the fastest-growing areas in finance away from the traditional working week. While most markets are closed over the weekend, brokerage firms have found a way to make it possible for people to access financial instruments over the weekend.
Technology is the most significant catalyst behind globalisation, making it increasingly possible to trade any day. The extended trading hours have gone a long way in catering to various traders’ needs, cutting across culture, trading style, and requirements.
People in the Middle East can now access and trade the capital markets from Sunday to Thursday as some traders’ access the markets from Saturday to Wednesday. Contrary to perception, you can access binary options, currencies, stocks, CFDs, and futures over the weekend.
How to Access the Markets over the weekend
Trading over the weekend is made possible by a handle of brokers. The brokers mostly specialize in providing access to markets in the Middle East, which operate over the weekend as New York and European markets remain closed.
For investors looking to gain exposure to the emerging markets in the Middle East, then the DFM Index would be an ideal place to start. The stock exchange allows traders to access stocks listed in the Dubai Stock Exchange, one of the biggest in the United Arab Emirates.
Tadawul Index, the only stock exchange in Saudi Arabia, would be an ideal pick for traders looking to trade some of the biggest companies in the Kingdom. The Tel Aviv 25 Index, which comprises 25 of the biggest companies, can also be traded over the weekend.
IG is an ideal brokerage firm for traders who wish to access European and U.S indices over the weekend. The firm offers access to the FTSE DAX and even Wall Street.
Weekend Trading Limitations
Given that some of the biggest markets remain closed, weekend trading does come with its fair share of challenges. The lack of sufficient financial instruments to trade is one of the most significant drawbacks of trading over the weekend. Stocks of some of the biggest companies traded in the New York Stock Exchange are out of bounds over the weekend.
Trading volumes are another big problem associated with weekend trading. The fact that traders in the U.S and Europe close shop on Friday leads to a significant reduction in trading volume, highly needed to drive prices.
Metals such as gold and silver experience a limited amount of trading volumes, which results in insignificant price movements that can make it challenging to generate profits. Low volume results in a flat market, making it extremely difficult to read the charts.
Time zones disparity is another major drawback to trading over the weekend. While most weekend trading focuses on Middle East financial instruments, traders in the U.S and Europe are usually at a disadvantage to access the markets. Such markets operate at less friendly hours.
Besides, weekend trading is synonymous with extreme volatility, which presents opportunities to make profits and could lead to excessive losses. Given the lack of healthy participants to balance supply and demand forces, the difference between bids and ask prices of stocks can be extremely high over the weekend.
Trading Strategies for Weekend Trading
Gap Filling Strategy
Gap trading is an ideal trading strategy for the weekend on markets that gapped higher or lower during the normal trading sessions. Given the lack of big players over the weekend, most gaps in the capital markets tend to feel due to a significant reduction in the trading volume needed to sustain prices in a given direction.
Likewise, weekend traders use this opportunity to enter short positions to close gaps that opened on the upwards. Similarly, buy positions are triggered to fill all the gaps that opened on the downwards.
The strategy takes advantage of the fact that gaps, in low-volume markets, tend to fill most of the time over the weekend.
Bollinger Bands are trading indicators often used to ascertain extreme levels in terms of price movements. The indicators indicate overbought and oversold conditions that traders take advantage of over the weekend.
The upper band often indicates an overstretched price level, signifying overbought conditions. If such a scenario was to appear over the weekend where trading volume is low, traders tend to open short positions in anticipation of prices struggling to move upwards beyond the upper band. Often, the price will stabilize and try to move towards the middle line known as equilibrium.
Similarly, whenever price moves lower for an extended period to penetrate the lower line or band, weekend traders use this opportunity to enter long positions. In this case, the idea is that given the lack of volume to continue pushing prices lower, and the price will often adjust by moving close to the middle line or band.
The best way to stay productive over the weekend apart from trading is to acquire additional information and knowledge. The weekend presents an ideal opportunity to perfect a trading strategy by absorbing as much information as possible when the broader stock market is closed.
Most traders use the weekend to go through what happened throughout the week and try to analyse price action of what is likely to occur in the coming week. Some traders use the opportunity to go through online courses that can provide invaluable insights on intricate strategies. Likewise, there are numerous books and e-books that one can go through.
Why trade at the weekends
The weekends present an ideal trading opportunity for perfecting some strategies when most market participants are not online. The markets tend to behave differently than when most markets are opened. Likewise, the environment makes it easy to execute some strategies given the low volume environment better than any other environment.
Bogged by a fully packed week, weekends present an ideal opportunity and chance to make a few trades for some people. The weekends allow combining a busy schedule with a trading career on the side. The weekend also comes with fewer distractions that make it easy for some people to concentrate and enhance decision making.