What you need to know about day trading during the holidays

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Bulls on Wall Street

The holidays are just around the corner. For many new traders reading this, this will be the first time trading during the holidays.

In addition to the festivities, this period has historical significance for the stock exchange. Summer trading is usually slow. Things pick up in the fall and ignite at Christmas time, which usually gives us a big wave of activity that carries us through the winter.

It can be exciting to approach the Christmas trading season, especially as a new trader. The action is picking up speed, stocks are flying everywhere, and opportunities are around every corner.

Today we’re going to cover some of the most important things to keep in mind this holiday season to make sure you’re trading effectively, safely, and profitably:

NEVER hunt

Fomo is high during the holidays. Opportunity is everywhere. There are stocks that circulate hundreds of percent when repeated, and it hurts any trader to miss those moves.

This is where the FOMO comes in.

The reality is, you won’t catch every runner. You will miss massive moves. But that’s part of trading. You need to force yourself to move on to the next opportunity and not get caught up in stocks that have already run. If a stock is already big, DO NOT hunt. Wait for the next one.

Don’t let greed and FOMO take advantage of you this holiday season when the markets are hot. Buy if support, sell if resistance. If a stock has already gone parabolic, walk away or find the easy short later.

Always lock-in profits

When you’re in a stock and it turns parabolic, you take profits. Always pay yourself on the go. It’s easy to indulge in greed when you’re up on a stock, especially if you’ve missed a number of previous runners and feel FOMO sneaking in.

Be emotionless when trading no matter how hot the market is. Don’t be greedy and make sure you take profits and follow your stop in places you know you should every time.

Keep an eye on small caps

Small caps tend to get a good boost during the holiday season, especially after the reporting season ends in November.

Keep an eye out for low floaters that are gaining extreme relative volume and breaking out of the all-important consolidation. Be patient for the entry. Hunting on the long side can be especially dangerous with small caps because most of the moves are manipulated, exaggerated, and made. They don’t last long.

Watch out for the Santa Claus rally

The “Santa Rally” is a typical event every year. It is basically a “calendar effect” that involves an increase in stock prices during the last 5 trading days in December and the first 2 trading days in January.

Historically, over the course of those 7 days, stock prices rose an average of 76% of the time, which is much more than the average of any other 7-day period of the year. The price movement has to do with many large funds shifting their inventories and covering short sales, as well as a surge in retail interest.

Note, however, that momentum is usually on the bullish side during this time window.

Don’t fight the trend

Shorts can get extremely stubborn during this time of year. With a lot of opportunities on the long side and a lot of stocks rising in price, shorts can be lured into some tough situations.

Use caution when shorting anything, whether it is large or small cap stocks, while the market is hot. Make sure you always have your stop-in, act with a clear mind, don’t fight the trend and clear your mind of prejudice.

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