All about investment

Douglas Newberry

Some people enjoy the thrill of trading and the profitability it brings. However, these traders sometimes need to hold off on trading stocks picks during seasons when it isn’t likely to make them any money.

The market is moody, much like some people. It has certain seasons of high volume and profitability and others of low volume and confusing direction. When the market is in its low volume periods it’s more difficult to make a profit. The low volume of trades leaves the market in a state of erratic pricing that’s difficult to predict and consequently even harder to glean profits from. With a risk-to-reward ratio as low as this, it’s best to stay out of the market during these times.

A quick look at your calendar can help you predict when some of these times will be. Other times may not be so set-in-stone or easy to predict. These seasons tend to change throughout the years with some periods being more significant than others and some significant periods fading in importance as time goes on.

The season between Christmas and New Years is particularly slow. Many traders spend time with their families during this week and consequently aren’t trading. You would probably do well to step away from the market and spend your time getting refreshed for the brisk trading that will commence at the start of the new year.

Perhaps the longest stretch of unprofitable trading time during the year is the summer. There is even an old adage that prescribes an absence from the low volume market during the hot months. It says, “Sell in May and come back again on St. Ledger’s Day." Since St. Ledger’s day is in September, why not spend your time with your family or having fun during the summer months and come back to the market when it’s moving predictably once again?

Of course, summer months aren’t always slow. In the summer of 2004 the market was particularly full of profitable moves.

Nevertheless, it’s always good to do a bit of “spring cleaning" to your portfolio. You may have some stocks you thought were going to pan out but conditions have changed. Sell these stocks before summer arrives. Even if summer does prove to be productive this year, you’ll be glad you got rid of some weak stocks.

The most important calendar to watch is your own. Are there times of the year you’re particularly unsuccessful at trading? Are there periods during the day where you’re not at your best? Use your trade diary to monitor these habits and act accordingly. Just as the market goes through particular moods, you too should monitor your own moods to ensure the greatest overall profitability.

Doug Newberry has many opportunities to consult for the conceptual development and usability of stocks picks financial tools and portfolio management software via his position as the Director of Investing Systems Network. He offers these trading tools to investors from more than 70 countries.

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