- December is a wild and wacky month
- Trade with a little extra caution
- Keep a tighter leash on positions
- Markets have a way of pushing
- Make sure to wait until the end of month
HODGEPODGE - I have found December can be a wild month to trade. It seems Decembers always invite plenty of volatility, though the price action takes on an identity of its own in this month. Clearly the rush to get it all in before the year ends has a lot to do with this. Perhaps many participants that aren't normally active in the market throughout the year, take the time to get involved during these final days in order to square up positions, readjust portfolios and rotate into alternative investments. Generally, it all makes for a big hodgepodge trading month and I always caution fellow traders to be even more careful than they already are. If you have tendency to win out into the deep, maybe swim a little closer to the shore. If you have a tendency to swim close to the short, maybe think about chilling back on the sand. Just upgrade to a higher level of caution with the trading.
TIMING IS CRITICAL - t's true. The volatility could bring a lot of opportunity, but it could just as easily bring heartache. I have seen too many traders put up a fabulous 11 month runs, all to give a good chunk back in December. But I'm not saying don't trade December, I'm just saying be aware that it is December. The other week I touched on December trading a bit. I highlighted my finding that quite often, the market will chop around a bit in the early month, but once it finally starts to commit to a direction, it will then look to push in that direction with a fierce intensity. So be mindful of this and know that if you are a contrarian trader, you should probably best time your contrarian bets to the very end of the month or first week into the new year where the the wacky trade finally settles down. I will still take my shots with short-term plays as I have most recently done with USDCAD and WTI OIL, but I won't let them do any meaningful damage to the work I have done since January. If they want to help sweeten the pot, great. If not, I will take a small loss and move on.