Price is set by whoever is willing to trade at the moment you send an order. When the number of willing participants falls, every remaining quote sits further apart, and the same trade size walks further through the book. That is the entire mechanism behind holiday liquidity, and it explains almost everything traders find strange about markets in late December, mid August and the first week of May in Asia.
The dates are predictable, which is unusual in this business. That makes holiday liquidity one of the few risks you can plan for weeks in advance.
The calendar that actually thins the book
Retail traders tend to think of Christmas and New Year and stop there. The desks that provide pricing have a longer list.
- Late December through the first working days of January: the deepest and longest thinning of the year in FX, metals and indices.
- Golden Week in Japan, late April into early May: Tokyo hours lose most of their depth, and yen crosses move on smaller flow.
- Mid August: European desks run skeleton staffing while US volumes also fall.
- US Thanksgiving and the half day after it: US afternoon liquidity effectively ends at lunchtime.
- Single market bank holidays: a UK holiday empties London hours even though New York is open, and vice versa on US holidays like Independence Day or Labour Day.
- Lunar New Year: Asian sessions thin for several days, and the exact dates move each year.
The single market holidays cause the most surprises, because the platform is open, the chart looks normal, and only the depth is missing.
What changes in the quotes
Three things move together. Spreads widen because market makers price in the cost of not being able to offload risk quickly. Depth at each price level shrinks, so a given order size crosses more levels and your average fill worsens. And the price impact of any single large order rises, which is why a bank rebalancing a position in a quiet session can produce a candle that looks like a news reaction to nothing.
Spread widening around the daily rollover gets noticeably worse in these periods too. If you already understand why spreads widen at rollover, holiday conditions are the same effect with the amplitude turned up and the duration stretched across whole sessions rather than a few minutes.
A stop loss is a request to be filled at the market once a level trades, not a promise of that price. In a thin book, the distance between your stop level and your fill is the number to worry about.
Why moves look bigger and mean less
A 60 pip move on a normal Tuesday in October requires real flow behind it. The same move on 27 December might be one participant clearing a position. Both look identical on a candlestick chart, and both will produce a breakout signal on any indicator you run.
This is where technical work degrades. Support and resistance levels are records of where trade previously happened in volume. In a thin session, price passes through them without the volume that normally makes them meaningful, then returns once normal participants come back. Traders who take those breaks as structural signals spend the first week of January being stopped out of positions the market never confirmed.
Tick volume on your platform gives a rough read on participation. It counts price updates rather than contracts, which makes it a proxy rather than a measure, and in holiday conditions it drops visibly. Our note on tick volume covers what it can and cannot tell you.
Gap risk on the other side
The second half of the problem is what happens when the holiday ends. Positions held across a long weekend or a multi day break carry the risk of an opening print some distance from where the market closed, because news accumulates while nobody can trade it. This is weekend gap risk extended over more days.
Two protections are worth checking before the break rather than during it. First, whether your account has negative balance protection, which limits how far a gap can push the account below zero. Second, whether your firm publishes changed trading hours and margin requirements for the period. Many raise margin ahead of long holidays, and a position that was comfortable on Friday can be at risk of a margin call on the Tuesday open at the higher requirement, without price having moved at all.
Practical adjustments
The adjustments are dull and they work. Cut position size for the period, on the basis that your stop distance now needs to accommodate wider spreads and worse fills. Widen stops in proportion, or stay out. Avoid pairs that depend on the absent session: trading AUDJPY through Golden Week means trading a cross whose home liquidity is closed.
Trade the sessions that are still staffed. During US holidays, London hours retain more depth than the US afternoon. During UK holidays the reverse applies. Our breakdown of the forex trading sessions maps which hours belong to which centres.
And treat the period as an opportunity to do the work you never have time for. Late December is the right week to rebuild a trading journal, review the year's trades and check whether your rules matched your behaviour. That is a better use of a thin market than forcing setups into a book that cannot support them. Trading is high risk in any conditions, and holiday sessions raise the cost of every error.
"Most blown accounts in late December are not bad analysis. They are normal position sizes running into a book that is a fraction of its usual depth."
— Alex Onta, Executive Director, SINGUARD
Key Takeaways
- Holiday liquidity is a depth problem: fewer participants means wider spreads, thinner levels and larger price impact per order.
- Single market holidays catch traders out because the platform stays open while one financial centre is absent.
- Breakouts in thin sessions lack the volume that makes levels meaningful, and often reverse when normal flow returns.
- Cut size, widen stops, check holiday margin requirements, and prefer the sessions whose home centre is still open.
Frequently Asked Questions
Which holidays affect forex liquidity most?
The late December to early January period is the longest and deepest thinning of the year. Golden Week in Japan, mid August in Europe, US Thanksgiving, Lunar New Year and single country bank holidays all reduce depth in their own sessions while the rest of the market stays open.
Why do spreads widen during holidays?
Market makers quote a spread partly to cover the cost of hedging the risk they take on. With fewer counterparties available, offloading that risk is slower and more expensive, so the quoted spread widens and there is less size available at each price level.
Should I close positions before a long holiday?
That is a personal risk decision rather than something anyone can prescribe. What is worth checking is your firm's holiday trading hours, any temporary increase in margin requirements, and how far an opening gap could move the position, since news accumulates during a break and the first print can be well away from the last close.
About the Author
Alex Onta is an Executive Director at SINGUARD. He built eTrader, the terminal, the mobile apps, eTrader Broker, Copytrading, Business and Community, along with the worldwide clustered-server infrastructure it all runs on, with his brother Roman Onta helping on the design, and he leads that division today. Together with Roman he builds the Prop Firm CRM, the Broker CRM, Scalegram and CopySignals, and the two of them carry worldwide compliance, payment processing and international business structuring side by side. He lives and works in Dubai for most of the year. Meet the executive duo leading Singuard's five divisions.