5 High-Risk Trading Times to Avoid

📌 PROP FIRM TRADING TIPS

5 High-Risk Trading Times to Avoid

Avoiding losses is just as important as winning in trading, especially when it comes to passing a prop firm challenge. To succeed, minimizing mistakes is key, and knowing when not to trade can be just as valuable as finding the perfect setup. Staying out of the market at the wrong times can protect your profits and help you meet the strict rules of most prop challenges, where even a few missteps can lead to failure.

Here are five risky trading times to avoid—and why doing so can help you pass your prop challenge:

1. London Close 🕒

The London close often tempts traders with breakout opportunities that usually turn into fakeouts. In a prop challenge, where capital preservation is crucial, getting caught in these false moves can quickly eat into your daily loss limit. Avoid trading between 10 AM and 12 PM ET to reduce unnecessary losses and protect your equity, which is essential to passing the challenge.

2. New York Close 🏙️

As the New York session winds down, spreads widen during the daily rollover, making it an unpredictable time to trade. In a prop challenge, these spread widenings can cause unexpected stop-outs or bad trade executions. Reducing trades during this time can help you avoid hitting your maximum drawdown, keeping you in line with the prop firm’s strict guidelines.

3. Before Big Data Releases 📊

Big data releases, like non-farm payrolls and inflation reports, can cause wild market swings. During a prop challenge, these sudden movements can easily result in quick losses, especially if you trade right before the data comes out. Most prop firms have tight daily loss limits, and one wrong trade during these volatile moments could jeopardize your progress. By sitting out before big data events, you reduce your risk of hitting your daily stop-loss or drawdown limits, increasing your chances of success.

4. Rate Decisions 📉📈

Central bank rate decisions are notorious for creating huge market swings, but leading up to them, the market often consolidates with little direction. This environment is a trap for prop traders. A bad trade right before a rate decision can lead to significant losses, damaging your chances of passing the challenge. By avoiding these periods and waiting for the market to settle post-announcement, you can focus on making smarter, more calculated trades, preserving your capital for better opportunities.

5. Holidays 🎉

Holiday trading might seem harmless, but the low participation and wider spreads can lead to unexpected losses. Since prop firm challenges typically have stringent rules about drawdowns and risk management, trading during these low-volume periods increases the likelihood of hitting those limits. Avoid trading on holidays to prevent being caught in false signals or poor liquidity.

Passing a prop firm challenge is about more than just winning trades—it’s about avoiding costly mistakes. By steering clear of these five risky times—London close, New York close, before big data releases, rate decisions, and holidays—you can reduce the chance of errors and protect your account from unnecessary drawdowns. This will not only improve your trading discipline but also significantly increase your chances of passing the challenge and becoming a funded trader.