As the year winds down towards a close and the holiday season takes over, there are still important lessons that one can take away from trading this period. Yes, markets will remain open and that means we as traders need to know how to navigate through the conditions in play.
So, what is the worst thing that you can do when dealing with markets during this period?
I would argue it is to go looking for something that just isn’t there.
Everyone likes action in markets. Nobody likes a dull day. However, it doesn’t mean that every action is one worth noting and chasing. And especially in a time like this, it doesn’t mean that things are what they would seem.
Liquidity conditions are thin and so the flows that are still there will exacerbate price movements in pretty much all asset classes.
Yes, some of moves might fit a certain narrative or bias that we as traders will associate to a certain asset. But again, correlation doesn’t mean causation in this case.
The thing about holiday-thin trading especially when the flows are pretty much the lowest for the year during a one-week period, is that sometimes things just don’t make sense. Price movements are exacerbated and there can be sudden spikes in volatility.
However, that doesn’t mean that markets are “moving” and that there is some fundamental event that is “shifting” the market narrative.
At the end of the day, we as retail traders can only go with the flow. And it’s important to always read the tea leaves and understand what trading conditions play to our advantage.
And this period just isn’t one of those times, typically. Yes, we can get lucky and get something from trades in the next week or so. But I would say, it’s more or less the same as going to the roulette table.
So if you’re wanting to chase that extra bit of profit or to make up for something else in the next week or so, proceed with heavy caution. This won’t be one of those normal trading periods with normal liquidity and market conditions, far from it.
Sometimes the best trade that you can make is to do nothing at all. And that’s an important lesson to always remember, especially when dealing with times like these.
To those already done for the year, I hope that 2025 has been a fruitful year of gains, profits, and lessons for everyone
