Sleep deprivation is a challenge somewhat unique to FOREX, although investors in other markets will also struggle if they are in geographically undesirable areas. The West coast of North America, for example, is such a place. When the New York Stock Exchange is getting off to a leisurely start at 9:30 AM, it’s only 6:30 AM on the West Coast. This can be challenging, to say the least.
FOREX is even worse, because the market trades 24 hours a day. Brokers will promote this aspect as if it’s a big benefit to you. “Trade when YOU want!” the ads all say. Just because you can, doesn’t necessarily mean you should. Short-term day traders are especially guilty of this, because many of these people (amateurs or part-timers) work a regular job 9-to-5, but dabble in the markets when they have spare time. This spare time is usually late at night, so they do some research and find out that the London market trades at night (in North America). “It’s as if the markets were made for me!” they will say with wonder in their voices.
Unfortunately, the market wasn’t made for you. The market was made for professional traders, working for large multi-national corporations, and for them its 8AM local time. You are just a guy (or girl) sitting in your den or basement, it’s 2AM, and you’re trying desperately to stay awake. This is not a recipe for success.
Most people have heard the gambling adage “the odds favour the house”. Simply put, this means that the games we play at the casino are tilted in favour of the casino. What many often forget, however, is that the casino will multiply that advantage by hosting an environment that puts the gambler at an additional disadvantage. They remove all clocks to disorient your sense of time, then pump oxygen-enriched air into room to counter the drowsiness. They overwhelm you with sound and light. Result? The gambler makes decisions which ordinarily they would not. Advantage: house.
FOREX has a similar characteristic in that the brokers encourage traders to trade at all hours. Why? Because many of the retail brokers in the industry are hedging against your position. For the un-initiated, this means that when you lose, the broker is winning. Not only do they take the spread as commission, but they also take the money you just lost in pips. If you are trading late at night, or early in the morning, you are more likely to make poor decisions, and those decisions will cost you money.