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Expansion of Your Trading Strategy

Expansion of Your Trading Strategy

The month of December tends to provide a variety of sometimes even bizarre trading activity for day traders, swing traders and investors. Trading volatility can vary, day to day or minute by minute, for that matter. Stocks, futures and forex markets will experience lull time during the month of December not only because it is the final trading month for the year with investors, hedge fund managers, etc. but also, the busiest holiday season of the year. Its the time of year that, if you have time off coming and your line of work slows down, you will take time off. That means a reduced interest in Wall Street.

Traders will experience lighter than normal trading volume but, will still be subjected to variable trading activity on a daily basis due to market news and economic data released throughout the month. December is the month when many traders and investors splurge on holiday vacations with family and friends. Day traders and short term traders need to expand their trading horizon while developing a holiday season trading strategy.

The world does not stop just because a holiday is coming. There remains unlimited profitability from trading during the month of December. Either you decide to spend time with your family or you decide to weather the holiday storm in watch for that perfect trading opportunity. This remains at the discretion of the trader.

While some day traders or short term investors frown on trading stocks over $100, $200 or $300 - the wise day trader does realize that while yes, these are expensive stocks, their volatility normally withstands sluggishness during the holiday season. Normally, the higher dollar stocks maintain interest from day traders, improving chances of profitability for the seasoned trader while trading them on a daily basis. Increased interest in these higher dollar stocks helps improve the traders chance of getting out of a position, into the run and not when its done.

Lower dollar stock trading can lead to higher trading capital losses due to the higher probability of trading share size being much higher than that of a trade on a higher dollar stock. Many traders make the foolish mistake of trying to focus only on lower dollar stocks because they think they have a better chance at making big money, of hitting that grand slam.

In all actually, many traders find more of a safety net when trading, as well as a more consistent chance of profitability on a trade with a higher dollar stock. In addition there usually is a better profit taking ability with a higher dollar stock. With a higher dollar stock, traders can run with wider stops and trade fewer shares which is an safer method of trading than a trade of a higher number of shares and a having to run with a tight, stop loss.

Traders need to take this time, if time permits, to reevaluate their trading strategy. Its time to update that wardrobe. Make the changes as needed to deal with the ever changing market. No two trading days are alike – and that includes you need to have an ever changing trading strategy.

December 2009


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