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Will Santa Rally 2017 Hold Or Will There Be Another Chance Next Week ?


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Maybe food for thought.


"Many traders hate to take trades off when the uncertainty of the weekend, holiday or seasonal liquidity is due to fall. Often, the trades are held in an effort to outwit the investing masses or follows a trading strategy that does not pay much mind to what activity levels and conviction can generate. Yet, there are more questionable reasons that traders adhere to when they pursue a trade during such distorting downtime.


Often times, taking a trade off before it hits its full profit can register a blow to an individual’s trading prowess so they hold out of ego and spite. Far more common – and proportionality asinine – is a desire not to miss out on the chance of follow through over and after the weekend. The investor doesn’t want to take off the trade before the weekend or holiday because the assumption is that money will be left on the table when they open again for trade. This is a dangerous way to think.


Weekends can be quiet, but then again they can also deliver systemic surprises. If there were a sudden and high profile event risk, a massive gap can occur in  the off hours. Can you imagine a 20 percent or greater drop in a trade you held overnight or through Fridays’ close? This has happened to me in the past. Weekend and holiday lull management is crucial to successful trading over a longer period of time.


What is the downside of taking off exposure (long-term or short-term)? The biggest hang up is that in ones trading account, the exit will be registered and reentering the position will reset the profit counter. So trade with a 200 pip profile for example over the weekend is not booked. In part, this caters to our visual cortex. We don’t want to see our account book profit and then reestablish the trade at presumably a worst price after the weekend. In reality, taking off and re-establishing after the weekend renders the same continuous trade or idea, but it looks separate in our accounts which troubles traders.


Don’t let this psychological hang up get in the way of good risk-reward management." John Kicklighter DFX

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