Trading doesn’t stop when the market closes. If you’re involved in proprietary trading (prop trading), you may be wondering whether you can hold your positions over the weekend—or even if you should. The concept of “holding over the weekend” might seem straightforward, but there are nuances that come with this decision, especially within the fast-paced, risk-laden world of prop trading. In this article, we’ll dive into the critical aspects of weekend trading, how it plays out across different assets like forex, stocks, crypto, and commodities, and the factors you need to consider before deciding to keep your positions open over the weekend.
Proprietary trading refers to firms or individuals trading financial instruments using their own capital, instead of on behalf of clients. This means that the risks and rewards are entirely internal. The primary goal in prop trading is to generate profits by taking positions in a variety of markets. Unlike retail traders, prop traders often have access to advanced algorithms, sophisticated risk management tools, and leverage, all of which give them an edge.
But when it comes to holding positions over the weekend, the picture becomes a bit more complex. Why? Because the weekend isn’t just an extended break—markets in various asset classes behave differently when closed, and the environment can shift unexpectedly once they reopen.
Forex trading is one of the most popular asset classes for prop traders. The forex market operates 24 hours a day, five days a week, but it technically closes on Friday evening (depending on your time zone) and reopens on Sunday evening.
Holding a forex position over the weekend can be an attractive choice since forex markets are less likely to experience extreme gaps compared to stocks or commodities. However, it’s crucial to be aware of a few potential pitfalls.
Key Considerations for Forex Weekend Trading:
Market News: Over the weekend, geopolitical events or unexpected economic data can impact currency pairs. For instance, a sudden political crisis in a major economy could cause substantial gaps when the market opens. Keeping up with the news is crucial to avoid being caught off guard.
Interest Rate Differentials: When holding positions in currency pairs with different interest rates, you might be subject to overnight swap rates (or rollovers). Depending on the currency, these can be favorable or costly.
While forex can be a bit safer for holding positions over the weekend, traders must still consider the risk of volatile market openings due to major news events.
Unlike forex, stock markets close for the weekend, so holding a position in stocks over the weekend is inherently riskier. The reason? You’re more likely to face a significant price gap when the market reopens on Monday. This can be due to company earnings reports, news releases, or macroeconomic events that occur over the weekend.
Key Considerations for Stock Weekend Trading:
Earnings Reports: Many companies release earnings reports after hours on Friday, and these reports can dramatically influence stock prices on Monday. As a prop trader, you’ll want to stay updated on any earnings reports or other news that might affect your positions.
News Impact: In the stock market, even a seemingly small news event can cause a big price swing. For example, rumors about mergers or acquisitions, changes in leadership, or shifts in consumer sentiment can all make a significant difference by Monday.
If you decide to hold stock positions over the weekend, it’s important to have a clear exit strategy or risk management plan. This could include setting stop-loss orders or using options as a hedge.
Cryptocurrency markets are open 24/7, which means there’s no “weekend” in the traditional sense. As a prop trader, this could seem like an easy choice, but even crypto markets have their own nuances to watch for. While you can always monitor your positions, volatility tends to increase during off-hours, particularly during weekends when liquidity may be lower.
Key Considerations for Crypto Weekend Trading:
Liquidity Risk: While crypto markets never close, weekends tend to see less trading volume, leading to wider spreads and potentially more erratic price movements. If you’re holding positions over the weekend, consider whether you’re prepared for sudden volatility.
Regulatory News: Over weekends, governments and regulators may announce new policies or regulations that could heavily impact crypto prices. These can create substantial gaps when the market resumes trading, and can be hard to predict.
Crypto offers flexibility, but with that comes a degree of unpredictability that can pose risks for holding positions long-term.
Commodities and indices are another popular asset class for prop traders, but they don’t operate 24/7. Most commodities, including oil, gold, and agricultural products, follow the traditional market schedule, closing for the weekend. Major indices, such as the S&P 500 or the NASDAQ, also close after Friday’s session.
Key Considerations for Commodities/Indices Weekend Trading:
Weekend Gaps: Similar to stocks, commodities and indices can experience gaps when markets reopen on Monday. These gaps can be driven by international events, changes in commodity prices, or geopolitical tensions.
Global Impact: Commodities like oil are highly sensitive to global news. A weekend OPEC meeting, for example, can impact oil prices sharply by Monday. Be mindful of any such events before holding positions over the weekend.
Pros:
Potential Profit: If you’re holding a position over the weekend and the market moves in your favor, the rewards can be significant. Some traders use the weekend to capitalize on longer-term trends or news events that unfold over the weekend.
Flexibility in Strategies: Some prop traders may choose to hold positions to benefit from potential price movements triggered by weekend news or developments.
Cons:
Weekend Gaps: This is the primary risk. Markets often open with gaps on Monday, meaning your positions could open either much higher or lower than you anticipated, causing significant losses.
Increased Volatility: Less liquidity and more erratic price movements can lead to more unpredictable outcomes when holding positions over the weekend.
Looking ahead, prop trading is expected to evolve with the integration of more advanced technologies, like AI and smart contracts. The growth of decentralized finance (DeFi) platforms and blockchain innovations is opening up new opportunities for prop traders. DeFi allows for more efficient, transparent trading without the need for traditional financial intermediaries. However, the decentralized nature also introduces its own risks, including smart contract vulnerabilities and liquidity concerns.
AI-driven trading algorithms are already making waves, offering more precise predictions and quicker reactions to market changes. As these technologies mature, prop traders will likely rely on AI to manage risks and identify profitable opportunities with higher precision.
In the end, holding trading positions over the weekend in proprietary trading is a decision that requires careful consideration. While the potential for profits is there, so too are the risks—whether it’s a sudden gap in the stock market, unexpected crypto volatility, or commodity price swings triggered by global events.
For prop traders, it’s essential to develop solid risk management strategies, stay informed about potential market-moving news, and understand the unique dynamics of each asset class. By doing so, you can make more informed decisions about whether or not to hold your positions over the weekend.
“Trade smart. Trade prepared. Hold with confidence.”
