Understanding Monthly and Weekly FX Market Characteristics for Effective Trading

Hello, FX traders. Today, we will discuss the characteristics and points to note for FX markets at the end and beginning of the month, and on Mondays at the start of the week. Understanding how markets behave differently depending on the month, day of the week, and period can help you trade more effectively. We will explain specific market movements and important points to keep in mind, so please use this as a reference.

1. Characteristics of FX Movements at the End and Beginning of the Month

FX trading at the end and beginning of the month has specific characteristics. Understanding these can help traders make more effective trades.

Characteristics in January

• January is an important month that indicates the overall market direction for the year.
• If the trend is upward in January, it is likely to be an upward market for the year, and vice versa for a downward trend.
• It is often said that the high or low of the year is set in January.

Characteristics in February

• February often sees the peak of the January upward market, followed by a decline due to reaction.
• A general downward trend can be observed from the beginning to the end of the month.

Characteristics in March

• March tends to show a strengthening yen trend.
• This is due to many Japanese companies settling their accounts in March, leading to an increase in converting foreign currency to yen.

Characteristics in April

• In April, new funds are expected to flow in, leading to significant movements in the forex market.
• It is said that there is a tendency for yen to depreciate as dollar buying and yen selling increases.

Characteristics in May

• In May, due to the decline in stock prices, there is often a tendency for the yen to appreciate.
• This is due to profit-taking sell orders on the rising market.
• May is also considered a turning point, and large changes often occur.

Characteristics in June

• June is considered a stagnant period and tends to be a turning point in the market.
• There is a high possibility that the annual high or low will be set in this month.

Characteristics in July

• In July, the yen tends to depreciate due to the influence of bonuses.
• With more funds available for investment, the dollar-yen market tends to move towards yen depreciation.

Characteristics in August

• In August, there is a strong yen appreciation trend, but it is also said to be prone to stagnation.
• It is called the summer doldrums, with the Obon holidays increasing the demand for actual demand, leading to a downward trend in the dollar-yen market.

Characteristics in September

• After the summer holidays, market movements tend to become active in September.
• The market trend formed at this time often continues until around November.

Characteristics in October

• In October, there is a tendency for US stock prices to fall, leading to yen appreciation.
• There is an anomaly called the “October effect” in the US, where stock prices often hit bottom, making yen depreciation more likely.

Characteristics in November

• In November, the market direction tends to end temporarily, leading to position adjustments and profit-taking movements.
• It is necessary to trade with an awareness of market reversals.

Characteristics in December

• In December, there is a tendency for yen depreciation, but it is also said that there are few large price movements.
• Due to position adjustments towards the Christmas and New Year holidays, the number of market participants decreases, leading to increased volatility.

By understanding these monthly characteristics, traders can make more effective trades. However, predicting the market is difficult, so it is important to manage risks carefully while trading.

2. Why It Is Important to Pay Attention at the End and Beginning of the Month

At the end and beginning of the month, important economic indicators and key figures’ statements are concentrated. These indicators can have a significant impact on the market, leading to concentrated buying and selling points for investors. As a result, there can be large price movements simultaneously with the release of economic indicators.

Due to these market characteristics, trading at the end and beginning of the month requires caution. Below, we will explain in detail why this period requires special attention.

1. Technical Analysis is Often Ignored
   At the end and beginning of the month, actual demand trading tends to increase, making technical analysis less effective. The more market participants, the more effective technical analysis tends to be, so when market participants are relatively few, technical analysis becomes less effective. Therefore, it is a time that requires caution for technical traders.

   
   

2. Liquidity Decreases
   At the end and beginning of the month, due to the release of important indicators and long holidays, liquidity can decrease. Particularly on US holidays, liquidity decreases, and the market tends to either not move or exhibit unstable movements. Therefore, it is important to consider whether sufficient liquidity is available when trading.

   
   

3. Price Movements Become Active
   On the other hand, at the end and beginning of the month, large price movements can occur due to the release of important indicators and key figures’ statements. Concentrated buying and selling points can lead to significant price fluctuations. This creates opportunities for profit, but also increases the risk of loss. Therefore, a trade strategy that balances risk and return is required.

   
   

4. High Possibility of Trend Reversals
   At the end and beginning of the month, there is a high possibility of trend reversals due to the release of important indicators and key figures’ statements. Particularly, the US employment statistics at the beginning of the month can be a major market point, leading to trend reversals. Therefore, traders need to closely observe market trends and take appropriate positions.

   
   

5. Increased Trading Risks
   The market at the end and beginning of the month is active, but the elements that make market predictions difficult also increase. The market can be significantly shaken by the release of important indicators and key figures’ statements, so traders need to pay close attention to risk management. It is also important to set strict trading amounts and entry conditions.

   
   

As described above, the end and beginning of the month have market characteristics that require attention. While price movements become active, technical effectiveness decreases, and liquidity decreases. Additionally, the possibility of trend reversals due to important indicators and key figures’ statements is high, so traders need to closely observe market trends and thoroughly manage risks.

3. Points to Note for FX Trading on Mondays

There are several important points to note for FX trading on Mondays. We will explain them in detail below.

a. Price Movements Tend to Be Large

On Mondays, economic news released over the weekend is not reflected in exchange rates, leading to sudden price changes. These sudden market movements are difficult to predict and can result in unexpected losses. Therefore, it is recommended to trade carefully right after the market opens on Mondays.

b. Decreased Accuracy of Technical Analysis

Monday’s FX charts do not include the weekend’s candlestick patterns, which can decrease the accuracy of technical analysis. This makes it difficult to analyze market trends and support/resistance levels accurately. When using technical analysis in Monday’s market, it is necessary to take this into account.

c. Increased Risk of Stop Loss

Sudden changes in Monday’s market increase the risk of stop loss execution. Stop loss refers to the automatic closing of positions when the predetermined loss level is exceeded. Since stop loss levels vary by FX broker, it is necessary to check the policies of the broker being used. Some brokers may also require additional deposits if losses exceed the account balance. Due to the possibility of unexpected stop loss executions in Monday’s FX market, it is necessary to trade carefully.

These are the points to note for FX trading on Mondays. By understanding these points, you can minimize risks during trading. For less experienced traders, it is recommended to choose more stable days of the week for trading. However, avoiding trading because it is difficult will not improve trading skills. To profit from Monday trading, it is important to acquire the correct knowledge and trading know-how, and understand the market characteristics of Mondays.

4. Points to Note About the London Fix

The London Fix is the act of setting a reference rate for foreign currency transactions for financial institutions’ customers. The London Fix is conducted daily, but the market tends to move particularly at the end of the month, quarter, and year. However, while the market tends to move around the London Fix, predicting its direction is difficult.

The London Fix time is highly watched, and speculative moves can accelerate based on intentions. Therefore, it presents opportunities for traders, but also comes with risks. Below are the points to note regarding the London Fix.

1. Short-Term Trading: The London Fix trade is a short-term trade around the London Fix time. Therefore, it is suitable for day traders and scalpers.

   
   

2. Pay Attention to Market Direction: The London Fix does not have a basic trend direction. Sometimes there is a reaction against the preceding market movements. Observations and predictions are only references, and there is no certainty.

   
   

3. Both Risks and Opportunities: The London Fix tends to have volatile price movements, offering profit opportunities but also a high risk of losses. Proper risk management and selecting strategies that match your trading skills are important.

   
   

4. Combining with Other News and Indicators: While the market tends to move around the London Fix, it is also important to consider trading in combination with other news and economic indicators. It is crucial to comprehensively judge multiple factors when predicting market movements.

   
   

By considering the above points, you can trade during the London Fix. However, since the market tends to move while its direction is hard to predict, careful trading is required. Choose strategies that match your risk tolerance and trading skills, and thoroughly manage risks.

5. Characteristics of Price Movements by Day of the Week

Each day of the week has its own characteristics and trends in FX trading. Below, we introduce the characteristics of price movements for each day of the week.

Characteristics and Trends on Mondays

• It tends to follow the market flow from the previous week.
• It is easily affected by news from the weekend.
• Gaps often occur.

The price movements on Mondays tend to follow the market flow from the previous week. If the downtrend continued until the previous Friday, the downtrend is likely to continue on the next Monday. Additionally, it is easily affected by important news that happened over the weekend, so it is necessary to check the news over the weekend. Furthermore, the phenomenon called “gap” is often seen in Monday’s market. A gap refers to a large opening between Friday’s closing price and Monday’s opening price. While gaps are generally likely to fill, they come with high risks, so caution is necessary.

Characteristics and Trends from Tuesday to Thursday

• There are fewer sudden price movements.
• The market tends to become active during the night.
• The market can become volatile during key figure statements and economic indicator releases.

The market from Tuesday to Thursday is relatively stable, with fewer sudden price movements. Therefore, it is a time frame that is easier for beginner traders to trade. Additionally, the market tends to become active during the night, so if you aim for trend markets, the night time is recommended. However, the market can become volatile during key figure statements and economic indicator releases, so caution is necessary.

Characteristics and Trends on Fridays

• There is a trend of position adjustments as it is the end of the week.
• The market tends to thin out.
• The market tends to become unstable.

Fridays tend to see position adjustments as it is the end of the week. Position adjustments for trading can cause the market to become unstable, and as the number of market participants decreases, the market tends to thin out. Therefore, Friday’s market is relatively more volatile. Especially with individual and institutional investors adjusting large amounts of funds, the market can change significantly, so caution is necessary.

These are the characteristics and trends of price movements by day of the week. When trading, it is important to understand the characteristics of each day of the week and plan appropriate trading strategies.

Summary

By understanding the characteristics of FX movements at the end and beginning of the month, and by day of the week, traders can create more effective trading strategies. The end and beginning of the month tends to see concentrated releases of important indicators, causing large market movements, so careful attention to risk management is necessary. Additionally, each day of the week has its own characteristics in FX movements, and it is important to choose trading methods that match these trends. Understanding these market characteristics and developing strategies that match your risk tolerance and skills are crucial for FX trading.

Frequently Asked Questions

What are the characteristics of FX trading at the end and beginning of the month?

FX trading at the end and beginning of the month tends to see large price movements due to the concentration of important economic indicators and key figures’ statements. Additionally, liquidity decreases due to the reduction of market participants, and the effectiveness of technical analysis tends to diminish. This creates trading opportunities with high risks and rewards, but also the potential for unexpected losses.

What are the points to note for FX trading on Mondays?

Mondays tend to see large market movements due to the reflection of economic news released over the weekend. Additionally, the absence of weekend candlestick patterns can decrease the accuracy of technical analysis, and there is an increased risk of stop loss execution. It is important to be aware of these points, but with the correct knowledge and skills, it can also provide effective trading opportunities.

What are the points to note regarding the London Fix?

The London Fix tends to see volatile price movements, offering opportunities for profit, but also a high risk of losses. Short-term trading around the London Fix is necessary, and predicting market direction accurately is difficult, making risk management important. Trading in combination with other news and economic indicators can help in more stable trading.

What are the characteristics of FX trading by day of the week?

Mondays tend to be unstable due to the weekend’s influence, while Tuesday to Thursday are relatively stable with fewer sudden price movements. Fridays tend to see position adjustments, making the market more volatile. Understanding the characteristics of each day of the week and planning appropriate trading strategies is crucial.