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Dealing with Summertime Doldrums

Dealing with Summertime Doldrums

Day traders and swing traders find themselves facing the occasional dull, lifeless markets during the summer months. Traders need to focus on learning how to deal with this type of market atmosphere and not simply get out of the market during this time since there will still be many potentially profitable opportunities.

One method many traders will revert to is, reducing lot sizes for trades they make, during the summertime doldrums. By reducing the number of shares traded, whether it is Stocks Trading, Futures Trading or Forex Trading, the individual trader reduces their financial risk and is able to widen their stop losses per trade. By widening a trader’s stop loss per trade, this enables the trader to remain in a trade for a longer period of time and avoiding sweating every tick or every pip. The widened stop loss also allows the trader to potentially trade a more volatile stock, futures contract or forex contract that they are more than likely ‘not’ trade. A day trader or swing trader is allowed the opportunity to learn how certain stocks, futures contract or forex contract react to the current days market action.

Traders need to be more selective on positions they may consider taking over the summer months. During the trading day while in the summertime doldrums, traders should ‘learn’ what time periods are more risky to their individual style of trading than others especially, when those specific time frames were generally not as risky, during off-peak summertime doldrums times. Traders will see that, while in summertime doldrums, trading volume may drop significantly during the afternoon hours. The selective trader may wish to hold back on questionable trades, per their individual trading strategy during the afternoon hours, especially if they are looking at an already low trading volume stock, futures contract or forex contract.

Some traders trading strategy need to be seriously converted, during the summertime doldrums. Some traders who normally practice gorilla style trading methods may need to adapt to another trading method during summertime doldrums due to a reduction in normal average trading volume.

Remember, there is no need to throw in the trading towel during the summertime doldrums, simply alternate your normal trading strategy to deal with the lower trading volume. Professional traders remain in the markets, regardless of the time of year the market is dealing with. The various trading experiences can widen the scope of potential profits for the smart trader, who learns to deal with ‘what the market is willing to give them’. No trader should ever expect for the market to react the same way, day in, day out regardless of the time of year, the holiday season or, the day of the week for that matter. Just as summertime doldrums create a different trading atmosphere, so do the individual trading days of the week. Experienced traders are fully aware that trading on Monday is a whole new ball game than trading during mid-week.

Summertime doldrums is a great time to partake in our Training Program since the new trader is more apt to not have an alternate trading strategy already in place. In addition, if you are a new trader facing this time of year for the first time, be smart and switch to demo trading (or practice trading) until you develop a different type of trading strategy. There is no need to foolishly risk valuable trading capital until you have a system that is profitable and that system can change, day to day just as it seasonally does as well. While demo-trading is far from the real deal, demo trading does allow the day trader the opportunity to test various trading techniques without risking real trading capital. No trader should ever view demo-trading as a waste of time.

July 2009


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