Trading during this time of year can be particularly challenging. Markets can range from being too slow to extremely volatile. Keep the following tips in mind when looking for opportunities on your favorite futures, commodities, stocks, and currencies:
1. Big traders and those running trading firms may be taking vacations. The traders who remain can cause unusual market movement. In addition, businesses are publishing annual and quarterly reports, expectations for the new year, and are looking to increase holiday sales. All of this activity can add to instability.
2. On and around holidays, markets will close early or will shut down entirely. On partial trading days and those surrounding holidays, markets tend to move slower than normal. Don’t be surprised by an early closure after you’ve been filled! Look out for these dates and times (in EST/UTC-5) as they apply to the CME (Chicago Mercantile Exchange) and the E-mini:
Wed., Nov. 23, 2016, day before Thanksgiving: Normal market hours
Thu., Nov. 24, 2016, Thanksgiving Day: Early close at 1:00 p.m. and reopens at 6:00 p.m.
Fri., Nov. 25, 2016, day after Thanksgiving / Black Friday: Early close at 1:15 p.m.
Mon., Dec. 26, 2016, Christmas Day Observed: Closed and reopens at 6:00 p.m.
Mon., Jan. 2, 2017, New Year’s Day Observed: Closed and reopens at 6:00 p.m.
Note that Christmas Day and New Year’s Day both fall on a Sunday, therefore the observation date is Monday.
3. On days when the FOMC (Federal Open Market Committee) meets, volatility lessens and price has a tendency to chop. The next dates are Dec. 13 and Dec. 14. The next meetings will occur in late January, 2017.
4. John Paul likes to use the ATR (Average True Range) to determine the profit target and stop loss for each trade. The ATR provides a measure of volatility, telling you how much the market could possibly move. It does not provide an indicator of direction, just potential. He uses the ATR with a period value of four. This means the last four bars are used in the calculation to gauge expectations. Stay out of the market when the ATR is below one point or above five points.
5. Big traders have holiday expenses just like everyone else. Trading firms need to meet annual goals. Everyone is thinking about spending and taxes. When large positions are taken and exited, this can create ripples and vacuums in the market. Be careful!
6. On average, market prices tend to increase towards the end of the year. If you’re shorting the market in a long-term position, be cautious. The Super Year pattern (look for an upcoming video) may change your expectations of long-term market direction for the coming year. Your intraday trading may be slower than normal, so account for this in your monthly performance analysis.
7. ‘Tis the season to enjoy the company of family. Take a break, refresh, and think about your trading goals for 2017. What will you do differently?
We wish you a happy Thanksgiving and holiday season!