We all want to trade in markets with some movement and volatility because that gives us a lot more chances to make trades. If you know when the markets are going to be more volatile and use that to your advantage, you will make a lot more money trading.
If this is your first or even second-year trading, the end of the year can be hard to figure out. When is the best time to trade, and when should you never look at the charts? Why is this important at the end of the year?
I’ll give you answers to these questions, which should help you finish the year strong and start the next one with confidence and optimism.
Best Trading Months at Year’s End
You might think that trading at the end of the year is easy: trade as usual, stop trading when the holidays start, and then trade again when the holidays are over.
In reality, though, things are very different. The last few months of the year are full of tricky situations and price changes. If you pay attention to the news and politics, trades that look good at first can quickly go against you.
When is the best time to trade at the end of the year?
After a month like August, which is often quiet and has frustratingly slow price changes (which is a sign of what’s to come), September is a busy month for prices. This can take a while, though, so don’t be surprised if the beginning of September is also slow because of the slowdown in August.
Without a doubt, October and November are the best months to trade at the end of the year. Before the holiday season starts in December, there are two months of busy trading.
If you want to get the most out of your time, you MUST trade during these two months. If you don’t, you won’t find a good time to trade again until sometime next year.
When you have been trading for more than 15 years, it helps to know how to handle the highs and lows of market liquidity. And I think the last three months of the year are an underrated trading time that doesn’t get enough attention.
This could be your last chance to claim a profitable trading year or lessen the impact of a losing year. You might also want to end the year on a strong note so you can start the next year with confidence.
All of these have a huge effect on how you think and how well you trade. When there is pressure to do well, people are more likely to give in to greed, fear, or forced trades.
When you combine this pressure with trading in an unfavorable market, you can end up losing money and feeling frustrated and down. Then, trading in the new year can feel like a sure way to lose, which can destroy your confidence.
So, let’s look at when you shouldn’t trade so you can make the most of your time and avoid putting yourself in this situation.
Worst Months to Trade at Year’s End
As soon as we get into December, things get a bit riskier. At this point, the holiday season is coming up, and the price will stay flat with some small moves and jumps.
Most likely, these moves are caused by news, which can be hard to predict and trade on with confidence. It’s hard to trade in this price state, but it’s not impossible.
The first week of December is usually when I stop trading. Before the holiday flatness gets too bad, but late enough that I can still trade if any good opportunities come up.
Trading in December is risky and will make you very upset. When you’re trading, frustration isn’t exactly a feeling that will help you do well. During this time, you not only have to fight the market, but you also have to fight yourself.
When it comes to trading in December, I’ve found that you really need to have a good handle on your trading psychology. Targets will be hard to hit because the market is unreliable, hard to predict, and likely to move sideways for a long time.
Why trade in these conditions when you could get ready to trade again when the new year starts?
If you keep a trading journal, which you should, you’ll have a year’s worth of information that you can use to see where you can improve.
This will make you a lot more money than any money you might make in December. Spend money on your future and don’t just focus on what’s in front of you.
Now, the holiday season goes all the way through January. Most of the time, it will take a few weeks for the market to get back on its feet. Remember how September usually feels like it has a hangover after August?
This also takes place in January.
Most of the time, I don’t trade until the last week or so of January. This depends on how the market is doing, though. You can watch how prices move to see when volatility goes up.
But the same trading problems from December continue into January, so don’t be surprised if you’re getting restless by the middle of the month. In these times, patience is your best friend.
Making deals for the New Year
It’s very important to have a good start to the year. You should be able to look at the charts with fresh eyes after a long break from trading. If you’ve had a hard year, now is the time to make a plan for what you want to change and how you want to get better.
If you had a good and profitable year, don’t let your guard down over the holidays. In trading, there is always room for improvement, and your results will help you see where.
There’s also the matter of trust. Too little and fear will take over, too much and greed will take over.
Find that balance, and you’ll be in a good place to start the trading year.
As I said before, it’s likely that the markets won’t get back to normal until the end of January or even later, in February. Don’t try to make trades when the market is slow. Instead, wait for opportunities to come to you.
So, as you move into the last few months of the year, make sure to use them to your advantage. Also, don’t put too much pressure on yourself. The best thing you can do at the end of the year is to set yourself up for success in the next.
“If you don't find a way to make money while you sleep, you will work until you die.”
- Warren Buffett
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