Prop trading firms come in different shapes and sizes. There are those with one-step evaluations and those with instant funding accounts. Some will allow prop trading with expert advisors whereas other prop firms allow you to trade the news. One of the most common things to look for is whether or not the prop firm allows overnight holding. This can have a significant impact on the way that you create your trading plan and develop your strategies. Let’s take a look at overnight trading and a selection of suitable proprietary firms to consider if this is something you require.
Putting it into layman’s terms, overnight trading implies buying and selling financial instruments in between the hours when the financial market closes and opens the next day. Trading positions that are open at the conclusion of the trading day are referred to as overnight positions. For trading the next day, these trades are held overnight.
The trading decisions, in overnight trading, are often based on the performance of the market during the day. Some markets such as forex trade 24/7, so there are ample opportunities to speculate on price movements any time of the day or night. The term “overnight positions” in the currency markets refers to all open long and short positions that a trader has as of the close of the FX trading day at 5:00 p.m. EST.
Trading overnight exposes the traders to danger from unfavourable swings that take place after regular trading has ended. Depending on the markets traded, the risk of trading overnight can be reduced to varied degrees. For instance, any dependent orders, such as stop-loss and limit orders, may be affixed to the open position in the currency market, or spot market.
There are many reasons to why someone would trade in the evening. This could be because they do not have the time to speculate on the financial markets during the day due to other work or family commitments. They might actually prefer the lower volatility of the markets during the evening, especially if they are using a forex trading strategy that looks to scalp reversal trades for a few pips. Then there are those who follow the economic news and might anticipate a particular event that can have a significant impact on the market overnight.
Despite the convenience of overnight trading, there are still hazards involved. For example, you may anticipate that a rising stock would perform well at the opening bell the next day, boosting your gains. The risk is that a huge event might occur overnight and cause you to lose money.
It really depends on your trading strategy. If you are a swing trader looking to capture long-term market moves, then you will certainly want to hold positions overnight. If you are scalping for a few pips here and there then you might not need to. Strategies that rely on small price movements can often struggle during evening sessions due to a lack of liquidity and low volatility. This means spreads are often higher than they are during the day time, not to mention you might need to pay a rollover swap fee.
It can also depend on where you are located. For instance, if you are trading in the evening in Sydney, this could be when the London market is just opening. Therefore, if you were trading currency pairs that included major currencies such as the GBP/USD, you there should be plenty of volume to catch some Signiant market moves. On the other hand, if you trade in the evening in New York, the US and UK markets are closed. This means that the trading volume will be lower, unless you branch out into cross currency pairs such as the AUD/JPY.
The hours during which regular trading occurs are predetermined and regulated by all significant stock exchanges. The majority of US exchanges are open for business from 9.30 am to 4 pm (local standard time), with the first deal setting the opening price and the last trade setting the closing price. In reality, though, there are three main markets where shares can be traded: the premarket, the normal market, and the after-hours market.
In other nations, different exchange trading hours are in effect. Every day, excluding Saturdays, Sundays, and holidays, the London Stock Exchange is open for business from 8 am to 4 pm. Milan shuts 5 minutes after Frankfurt Stock Exchange, Euronext Paris, and the Swiss Exchange close at 5.30 p.m. Shanghai is open from 9.30am to 3pm with a 90-minute lunch break, and the Tokyo Stock Exchange is open from 9.00am to 3.00pm in Asia.
Typically, overnight trading reflects transactions that have taken place while these exchanges are closed on a foreign market. For instance, the foreign currency market is open 24 hours a day in exchanges all around the world. Overnight trading is made possible by the trading hours overlap between Asia, Europe, North America, and Australia. Investors should keep in mind the high levels of risk associated with overnight trading, including the danger of overnight delivery and the risk of currency fluctuations.
Overnight trading can be a great solution for those who have other obligations during the day or those who want to monitor the markets for potential setups that may occur the following day. However, despite the relative ease of overnight trading in terms of broker and platform availability, a trader must use caution while making trades in the evening. Trading decisions need to be supported by considering various factors such as global news events that affect the market, technical analysis and price action.