Avoiding low-liquidity periods is often recommended in trading — and for good reason. These periods can be unpredictable, with wider spreads, unexpected price spikes, and poor execution. But is it true that you must always avoid them? Not necessarily. While low-liquidity periods pose risks, they also offer unique opportunities for the prepared and strategic trader.

What Are Low-Liquidity Periods?

Low-liquidity periods occur when there are fewer active buyers and sellers in the market. This leads to:

• Wider bid-ask spreads
• Increased slippage
• More erratic price movement
• Fewer filled orders at desired prices

These periods are common during:

• Off-market hours (e.g. late New York or pre-Asian session)
• Public holidays or long weekends
• Economic data blackouts
• Weekends in crypto markets
• Low-impact sessions in the 24-hour forex market

Why Traders Are Told to Avoid Them

1. Poor Trade Execution

During low liquidity, your orders may not be filled at expected prices, especially with market orders. This can distort your risk-reward ratio and trigger unwanted entries or exits.

2. False Breakouts and Noise

Lack of volume often leads to false breakouts or random spikes that don’t reflect true market sentiment. Traders can get whipsawed by meaningless moves.

3. Difficult Risk Management

Wider spreads and gaps make it harder to place tight stop-losses or achieve precise entries. Risk control becomes more difficult to maintain.

When It Makes Sense to Avoid Low Liquidity

• Scalping or short-term trading, where spread size and fast fills are critical
• News trading, where lack of volume can amplify slippage
• Newer traders, who may not have the experience to distinguish noise from genuine movement

In these cases, it’s usually best to wait for high-volume sessions like London Open, New York Open, or scheduled news releases.

But There Are Opportunities in Low-Liquidity Periods

1. Anticipating Big Moves

Sometimes, major players position themselves during quiet periods. If you’ve done the analysis, entering early can offer better pricing — but it requires conviction and patience.

2. Range Trading in Asia Session

Certain currency pairs (e.g. AUD/JPY or USD/JPY) move calmly during the Asian session. Traders who specialise in mean reversion or tight ranges may find profitable setups here.

3. Overnight Positioning

Swing and position traders may use low-liquidity hours to place limit orders or build positions when volatility is lower — assuming they’ve accounted for potential gaps or slippage.

How to Trade Safely During Low Liquidity

• Use limit orders, not market orders
• Widen stop-loss margins or reduce position size
• Trade only high-quality setups backed by broader context
• Avoid highly reactive strategies that depend on quick movement
• Watch spreads carefully, and avoid pairs or assets with excessive slippage

Conclusion

You don’t have to avoid low-liquidity periods — but you must respect them. For most traders, especially beginners, it’s wise to focus on high-liquidity sessions. However, experienced traders can use low-volume hours to their advantage by adapting their strategy, managing risk, and seeking specific types of setups.

Learn when to trade, when to wait, and how to adjust your tactics in every market condition with our Trading Courses, designed to sharpen your edge with both timing and execution.