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What is Overnight Trading?

Overnight Trading is the trading of currencies within the local time of 9:00 pm until 8:00 am the next trading day. Basically, a trader buys and sells currencies as the local trading hours end. The trader conducts transactions overseas where markets are still open due to varying time zones. The foreign market will then accept the transactions while the local market is closed. Executions of these transactions will occur some time in the evening to the early morning.

Overnight trading offers several advantages. One of them is being able to quickly act on economic events that affect the trades. This is because usually, economic events for a certain place occur often after the local trading hours. Examples of such economic events include earnings report, market analysis, etc. Another advantage is that traders are able to get ready.

However, few traders are actually participating in this kind of transactions as it carries significant risks. These risks includes heightened volatility due to fewer traders buying and selling. Another disadvantage is the uncertainty of trade executions as transactions are accepted but only executed by the time the local market opens.

Overnight trading may be advantageous however be cautious of the dangers of the night market.

Created by : Samuel
Published : 28 May 2015

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