It is a period of low volume and high volatility due to the festive season. Market movements are more random, faster and greater in size. News flow is also somewhat muted. Thus there is less reporting of sentiment and/or fundamental changing events to help guide trading/investing decisions. I would like to share some trading and investing tips for this festive season.
Trading
Trading is more difficult due to the following:
- the greater randomness in price action lowers the probability of success in trades
- the larger price movements make risk management more difficult and increases emotional stress
I would advise to scale down position sizes and/or require more optimal setups before entering trades.
Investing
For investors, the high valuations of markets mean the risk-reward ratio is still not favorable. There is a significant possibility of a steep correction. However, the heightened volatility may cause larger than warranted falls in certain stocks or other asset classes, so it may be worthwhile to continue monitoring your favorite stocks to see if they can be picked up at good prices.
For Both
Trading and investing are a bit trickier during this period, so it is perfectly fine if you would like to use this chance to take break. If you have been working hard, it is a good time to take a breather and recharge for the new year ahead! Both mental health and physical well-being are important not only for optimal performance, but also for general happiness in life. So do remember to take good care of yourself!