When it comes to prop trading—particularly in the world of cryptocurrencies—the rules and dynamics often seem to blur. Traders are typically accustomed to the markets unpredictable swings, but when you throw in a weekend where markets traditionally close, the question arises: can you hold cryptocurrency positions over the weekend in prop trading? The answer isn’t as straightforward as it seems. Let’s dive into why this is a critical question for those involved in the fast-moving world of digital assets and proprietary trading.
Proprietary trading, or "prop trading," refers to firms or individuals trading with their own money rather than clients funds. This type of trading gives traders the flexibility to make decisions based on their research and strategies. In contrast to retail traders, prop traders often have access to more capital, sophisticated tools, and leverage, which can amplify both potential rewards and risks.
Cryptocurrency markets, on the other hand, operate 24/7, unlike traditional markets, which typically close on weekends. This creates a unique challenge for prop traders—should they leave their positions open through the weekend, or is it safer to close them off before the traditional market close?
One of the defining characteristics of the crypto market is that it doesnt shut down over the weekend. Unlike stocks or forex trading, which follow fixed trading hours, cryptocurrencies can experience significant price movements around the clock, including on weekends. This feature can be both an opportunity and a risk.
Although weekends typically see lower trading volumes than weekdays, crypto markets can be volatile regardless of the day of the week. Historical data suggests that while many traditional markets “take a break,” cryptocurrencies sometimes go in the opposite direction and experience large price swings during these quieter periods.
Take, for example, Bitcoin’s price swings during the weekend. In previous years, we’ve seen drastic shifts in price between Friday evening and Sunday night, when liquidity can be lower and institutional traders are less active. Prop traders in the crypto space must weigh the risk of leaving their positions open over the weekend, especially if they’re using high leverage.
Risk management is critical in any form of trading, and even more so when dealing with cryptocurrencies over the weekend. Prop traders typically have predefined strategies for managing risk, but weekend trading introduces extra challenges. For example, unexpected geopolitical events or regulatory announcements can create sudden shifts in market sentiment. The lack of instant market responses due to fewer institutional players can mean wild price swings that traders may not be able to manage in real time.
For traders looking to hold positions over the weekend, it’s essential to assess the liquidity of the asset youre trading. Low liquidity can lead to wider spreads and slippage, which can be costly, particularly for those with a short-term trading focus.
While it may seem risky to hold positions through the weekend, there are distinct advantages to doing so, especially in the world of crypto prop trading.
As mentioned, lower volumes on weekends can result in unexpected breakouts. For example, some traders deliberately hold positions over the weekend, anticipating price movements that could happen outside of regular market hours. This could be driven by sentiment changes in the wider crypto ecosystem, announcements of new projects, or major market participants making moves over the weekend.
By holding positions, traders can capture those moves and profit from increased volatility. For some prop trading firms, this could be a strategy baked into their trading plans, especially for short-term, high-leverage positions.
In decentralized finance (DeFi), liquidity pools and decentralized exchanges (DEXs) are continuously active. Prop traders dealing in decentralized assets don’t face the same restrictions as traditional markets. They have the flexibility to access their positions and make trades 24/7, which means they dont have to worry about closing positions to adhere to the usual market hours.
For traders using proprietary funds, flexibility is key. Prop traders can take on risk that retail traders cannot—especially if they are working with firms that allow them to hold assets across weekends. This flexibility to adjust strategies, take on calculated risk, and explore opportunities during off-market hours can be a huge advantage for those with the expertise to handle it.
While there are clear advantages to weekend trading, the challenges cannot be overlooked. Holding positions in cryptocurrencies through weekends comes with its own set of risks that prop traders must consider:
Even though the crypto market operates 24/7, it is still much more volatile than traditional markets. Over weekends, with less institutional support, sudden shifts can occur due to speculative retail traders, which could lead to positions being liquidated unexpectedly.
A prop trader’s ability to react quickly and adjust positions is critical. But what if liquidity dries up during a weekend trade? Or worse, what if a market-moving event happens outside of typical hours?
Another challenge faced by prop traders holding crypto positions over weekends is the evolving regulatory landscape. Governments are increasingly focusing on crypto markets, and sudden announcements of new regulations (such as country-specific bans or restrictions) can send shockwaves through the markets.
Prop traders must be well-versed in risk management, including ensuring they have mechanisms in place to deal with unexpected regulatory changes.
Looking ahead, the landscape of prop trading is set to evolve even further. Technological advancements, especially in artificial intelligence (AI) and blockchain, are transforming how traders operate.
AI-powered tools are becoming more common in prop trading. Machine learning algorithms can detect patterns in crypto price movements and make real-time decisions that would be impossible for a human trader to replicate. These tools can also help predict market behavior over weekends, making it easier for traders to hold positions with a higher degree of confidence.
Smart contracts, which are self-executing contracts with the terms of the agreement directly written into lines of code, are becoming more common in decentralized finance (DeFi). Prop traders who are active in DeFi can use smart contracts to automate their trades, reducing the need for manual intervention and helping them to more effectively manage risk during periods of low liquidity, such as weekends.
The decentralized finance ecosystem is exploding in popularity, and it’s changing how prop traders interact with markets. Through decentralized exchanges, prop traders can trade assets at any time without the limitations of centralized trading platforms. This shift to DeFi represents a major shift in how capital is managed, and it’s something prop traders will have to consider as they look at the future of weekend trading.
The question of whether to hold positions in cryptocurrencies over the weekend in prop trading boils down to risk tolerance, strategy, and available resources. While holding positions can open up opportunities for weekend breakouts and leveraging 24/7 markets, it’s also critical to stay mindful of volatility, liquidity, and potential regulatory shifts.
For those looking to thrive in prop trading, it’s all about understanding the landscape and using the tools at your disposal—whether that’s AI-driven strategies, smart contracts, or traditional risk management techniques. As the financial world continues to evolve, prop traders who can adapt to both traditional and decentralized markets will find themselves at the forefront of this exciting industry.
"In prop trading, every weekend brings a new opportunity—if you’re prepared to ride the wave!"
