The Holiday season might be the most exciting part of the year. Many investors are more absorbed in looking for presents and decorating the Christmas tree than thinking about which instruments are worth buying or selling now.
The 24th and 25th of December fall on a weekend to close out 2022. The 26th is a Monday, and both the US and European stock exchanges will be closed. This includes Nasdaq and NYSE, as well as the markets in London, Frankfurt, Paris, and Amsterdam.
On the other hand, Asian stock exchanges and the Forex market are open on this day. On New Year’s Day, however, even the Asian stock exchanges are closed.
The Holiday Season however brings some changes to the markets. We asked our Master Traders to give us hints and tips about the season. Below we will discuss what those changes are, traders’ mistakes during the season, best practices, and more. Here is what they said:
Holiday Season Trading Tips
Despite the fact that the market continues to move during December, there are periods when the market becomes somewhat passive. It is in those periods that traders need to more deeply evaluate the timing of purchases and sales of assets. Below we will discuss some useful tips for the season.
“Don’t get too emotional. Some people may have had a bad year with trading and will “double down” to end the year on a high. This very rarely works. Keep to your long-term goals.”
Ben Sadgrove, Chief Operations Officer at Tradeview Markets
We all know how sentiments and feelings affect us. Like in every other aspect of life emotions can also drive our trading actions. During seasons of high-emotional movement, it is recommended to stick to the long-term goals you set in the first place. Below you can find more specialized articles on Market sentiment and emotions:
“Those periods where the market is a little more passive than normal is a good time for the trader to carry out annual backtesting and be able to anticipate trends in a longer timeframe, thus preparing his work plan for the following year, identifying the main trend with which 2023 will begin.”
Moises Peña, Account Manager at Tradeview Markets
“Trading equities during the Holiday Season can be both challenging and very rewarding. Volume tends to be on the lighter side as many investors focus more on traditional holiday activities rather than assessing the market for opportunities. Moreover, volatility trends lower during the month of December.”
Michael Lombardo, Global Head of Equities at Tradeview Markets
Holiday Trading Tips for Futures
Jason Kovalcin, Business Development Director for Tradeview Markets gave us his insight on Exchange Futures Trading during the Holiday Season. There are 2 things that come to mind when trading on Exchange Futures/Options during the Holidays.
- Exchange Holiday schedule and market hours.
Exchanges publish Holiday observations annually. Different Exchanges can also observe different Holidays depending on where they are located in the world. For example, EUREX does not observe US Independence Day (July 4th ) like the American CME does.
Lastly, some Exchanges may have an early close before a Holiday and this can often vary by market segment. Bottom line is to consult your broker to be aware of market hours when trading during a Holiday. No one wants to trade on a blank screen.
- Understand the liquidity profile of the instruments and markets you are trading.
During the Holidays people are traveling to spend time with families and loved ones. This also includes traders, who may actively provide liquidity to specific markets. It is not uncommon for professional market-making firms to completely shut down for the last 2 weeks of a calendar year.
With fewer market participants bid/offer spreads can widen and price movements can occur rapidly. Perhaps the ILS/MXN market may not be as liquid as it was a day or two ago or the Milk Options market isn’t .01 tick wide.
With wider spreads, it can be more expensive to trade in and out of positions. Increased costs can reduce the profitability of your trade. Overall it is best to speak with your broker when trading any new instruments.
For more information on Tradeview Markets Futures/Options offering please visit our website
https://www.futures.tradeviewforex.com or drop us a line at futures@tvmarkets.com
Santa Claus Rally
“In December, some traders take advantage of a trading strategy commonly known as the “Santa Claus Rally”. It’s a bullish trend that’s defined by a stock market rally during the last five days of the year and lasts until the end of the first two trading days of the year. However, traders need to be aware that certain stocks will also succumb to end-of-year tax loss selling.”
Michael Lombardo, Global Head of Equities at Tradeview Markets
Join the Santa Claus Rally! The coming end of the year hints at the arrival of the Santa Claus Rally. This concept is well known to many investors, who at this time expect significant increases in the stock market. This is especially evident in the last few days of the year, between Christmas and New Year, where it has been observed that investors are achieving better-than-average returns.
It is worth mentioning that this period is getting longer, due to the increasingly long Christmas fever, which can even last a whole month. As historical data shows, most of the world’s major indices rise rapidly during this period, and December is often one of the best months of the year.
This seasonality is due to trades being settled and investor portfolios being prepared for the year ahead, what we call the ‘January effect’. However, the very legend of the market Santa Claus Rally has become somewhat of a self-fulfilling prophecy.
**The Santa Claus Rally section was fully written by Oliwier Taraszkiewicz, Tradeviews Business Development, and Sales Team Member
Holiday Season Trading Mistakes
“The Christmas and New Year period is a busy time, making many investors and traders not focused enough on following the market. It is then easy to make the mistake of getting distracted and missing an opportunity or waiting too long to execute a trade.”
Oliwier Taraszkiewicz, Tradeviews Business Development and Sales Team Member
“Don’t drink and trade….this might sound funny but this is usually the season for company drinks and the last thing you want to be doing is making serious trades while under the influence.”
Ben Sadgrove, Chief Operations Officer at Tradeview Markets
“Many traders who use CFDs forget to sell them before Christmas and hold them until the new year, with the associated additional costs in the form of swaps. These can have a negative impact on the outcome of the trade, which should be considered in advance.”
Oliwier Taraszkiewicz, Tradeviews Business Development and Sales Team Member
“One of the most common mistakes traders make is rushing their entries trying to find movements similar to those they may be used to at other times of the year with greater market movement.”
Moises Peña, Account Manager at Tradeview Markets.
“The non-settlement of certain transactions may affect the net profit for the entire following year. This is due to taxes on realized gains and deductions on transactions closed at a loss, which exist in various forms in many countries. Investors should therefore find out which solution will be the most favorable for them from a tax point of view, as a decision taken in the last few days of the year may affect the whole of next year.”
Oliwier Taraszkiewicz, Tradeviews Business Development, and Sales Team Member
“The most common mistake made by traders during December is overtrading. Traders will have a tendency to force trades despite decreasing market opportunities due to the Holiday Season. This over-willingness to trade leads to unnecessary losses.”
Michael Lombardo, Global Head of Equities at Tradeview Markets
Attractive Sectors for the Holiday Season
There is a certain correlation in the market between the time of year and sectors that are particularly in demand during this period. For many companies, the end of the year is crucial, as this is when they achieve their highest sales and revenues. Consequently, it is worth observing how eCommerce, retail chains, and food or toy manufacturers perform.
While individual sectors of the stock market are influenced by the upcoming holiday season, it is difficult to clearly identify particular classes of instruments that would be affected by the Christmas period and New Year.
“It is worth mentioning the expected lower liquidity and therefore larger spreads occurring in the market. Consequently, it would make sense to focus on the most liquid instruments on which trading costs remain relatively low, even at a time of decreased liquidity at the end of the year.”
Oliwier Taraszkiewicz, Tradeviews Business Development, and Sales Team Member
“This holiday season, I believe the Technology Sector will see some capital allocation. The sector has completely underperformed in 2022 and is very much out of favor among market participants. I think this might present an opportunity for those investors with a longer investment time horizon.”
Michael Lombardo, Global Head of Equities at Tradeview Markets
“The great thing about FX is that you don’t need to avoid anything. There is always opportunity”
Ben Sadgrove, Chief Operations Officer at Tradeview Markets
Forex is a great market to dive into. The Forex or Foreign Exchange market “is an online investment system where, as a trader, you can speculate on or hedge movement in future currency exchange rates. The Forex market is the largest financial market in the world. It includes international and local companies, banks, hedge funds, investors, and retail traders. It is open 24 hours a day, 5 days a week.“ Below you will find some of the best articles from our Forex Library.
- Forex Trading For Beginners
- Best Online Trading Forex Strategies
- Top Forex Trading Tips
- Currency Exchange and the Forex Market
Which Sectors to Avoid during the Holiday Season
According to Oliwier Taraszkiewicz these are some sectors to be vigilant about during the Holidays:
- Stock market investors should bear in mind the specifics of Christmas and New Year. The holiday season is a time when some sectors of the economy are very active while others are stagnant. One of these is definitely Education and Office Supplies. The services and products of this industry are in limited demand during the Christmas break.”
- The end of the year can also be a poor time for fast-food restaurants. Over the few days of Christmas and the New Year, many people celebrate with loved ones at home or go out to a fancy restaurant. What is more, Christmas and the New Year usually mean a significant expense, which is why, in the first weeks of the new year, there is a tendency to reduce spending and therefore also to eat out less.
- Real Estate Industry also faces a slowdown due to the upcoming holidays, which many feel are not the best time to move. This is likely to be particularly evident this year, influenced by rising credit rates and limited access to capital. For this reason, many experts are forecasting a difficult time for the property industry.
We also asked Luis Pinto, Senior Analyst at Tradeview Markets. This is what he told us:
After Powell’s speech, there are criteria to follow. If they keep fighting inflation, as Powell mentioned, I should avoid growth tech without a healthy balance in the stock market. All this year this kind of stock goes down more than 50% in general. Downgrades every quarter and with inflation and potential mild recession difficult to deliver. Another sector to avoid, is consumer discretionary, at least in this environment of select purchases, with lower saving rates of householders and inflation.
Keep in mind Powell reiterates his target of a 2% inflation goal, and all monetary tools will be used to accomplish that goal. Still see a soft landing, so will keep increasing rates, or at least at some point in 2023 will hold. Powell was clear yesterday about not cutting rates in 2023.
Besides Powell, the Christmas season will avoid the energy sector, showing a downtrend and always a bad time to buy. Russia cap and some recession fears will keep this sector out of my list short term. And finally with today’s economy, bad print number retail sales. I would take care to pick retailers, it seems not much spending power these days or below retailers’ expectations… It’s the Christmas season on a bear market, so be aware of your picks.
“Patience is one of the main profitable skills of the trader and in December it is a month where this skill must be worked very well”
Moises Peña, Account Manager at Tradeview Markets
Can Santa Save December?
TradeGATEHub is a Social Trading Platform where you can chat in real time with experts, find live market updates, and attend live streams where you can learn from our experts. Below we present you some insights on one of TGH greatest videos for the season.
“The question is, Can Santa save December? Maybe people are looking for the Santa Claus Rally too early. I mean if I was Santa I wouldn’t be getting on my Slade on the 6th of December to make deliveries on the 24th. I think I can wait until the Fed to charge out Rudolf’s nose so that I can see through the whole snowstorm when I am delivering your gifts.”
Dale Pinkert, Trading Coach and TGH
“The Santa Rally for the first year this time is different, it been a different Santa, its been a different season when Christmas as you will is for some time now, even its more hectic.”
Michael Venezia, Head Trader and Coach at Tradeview Markets
“Dinner Markets are more susceptible to bear rates, the dollar has weakened, and it’s hardly supporting the S&P.”
Dale Pinkert, Trading Coach and TGH
“Earning season is starting to abate and some of these stocks are having nice earnings, having one-day wonders.”
Michael Venezia, Head Trader and Coach at Tradeview Markets
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