Trading over the summer months can be hit and miss at times. Some years it can be great, but many other years it can be slow and dull. Big traders and fund managers etc. will take off this time to enjoy it with their families and recharge their batteries. Central bankers – those who are currently the main drivers behind market movements – are also likely to take time off. So in the absence of bigger players and market movers, it makes sense that markets would slow down somewhat.
I was chatting to a trader friend last week and he told me he had decided to take off two whole months over the summer. I know the guy well, so I didn’t need to ask the reason for why he was taking such a long holiday – he’s always looking to trade when there’s action and good volume. And whilst the guy’s not a small trader, he’s certainly no hedgefund. So it trickles down from the very top to the one lot trader.
The fact of the matter is though, that the markets are still the markets and there are plenty of people about trading. But they are a little different over potentially quiet periods. Often what you’ll see is they either drift in one direction for much of a session or they move slowly in a very tight range with the odd quick move thrown in for good measure. But if you can adapt to these conditions you can make money and it’s usually your mind that has to adapt before anything else can change. Seeing the markets moving so slowly can be immensely difficult after having some good movement in the preceding months. But ultimately the markets still do what they normally do.The drifters
When markets are drifting in one direction, they’re likely to continue to do so until enough activity comes in to stop them. This is no different from what markets do all the time. However, the length of time a move takes can be different. A move when the markets are plodding on in one direction can seem to take an age in the summer. Maybe they do take longer, but the big aspect for me is that pullbacks are shallow. You might not even recognize them as proper pullbacks, but when volumes are lower this is what you can expect. A deeper flush could spell out something entirely different to what it normally would.The snap moves
Then there are the times when the markets are seemingly dead in the water. Nothing is going on at all and ranges/volumes are depressed. So are most traders. But here’s the thing: when markets are like this and then something to drive the markets in a direction appears, moves can be sharp. This driver could be news or simply liquidity entering at a technical level. But because the opportunities are likely to be limited in number, when something does happen, everyone wants in and in as quickly as possible. So if you’re alert to this and anticipate these breakouts, they can provide some excellent opportunities to take a trade.
I’m not trying to predict what trading this particular summer will end up being like – the markets are certainly still jumpy about central bank policies and some big risk event can happen any time. But the signs were there over the last week especially, that the typical summer trade is here. So if you are still here, don’t expect markets to move in exactly the same way as you would usually expect them to, but realize that they are still functioning markets. Sure there might be fewer opportunities about, but if you change your mindset and stay alert they do still exist. If you know what to expect and you’re willing to adapt, there’s money to be made trading over the summer.