Over the last few weeks, I’m sure you’ve enjoyed the public- holidays one after another. With Human Rights Day, Good Friday and Family Day come and gone, I’m sure you have created wonderful memories filled with food, drink, family and friends. But as a trader, this can be disorientating.
And eventually, you’ll need to get back to growing that portfolio of yours. Here’s how to do just that.
Two steps to start your trading again after public holidays
Step #1: Take a step-back
The first step is to, in fact, take a step-back. What I mean by this is I suggest you don’t even take a trade for the first few days. You need to see how the main market has reacted and which direction it will decide to head. Now I am a breakout trader who trades the Top 40 companies on the JSE. This means the main market I look at is the JSE-ALSI40 (SA40.Fut) chart using MetaTrader 4.
Here it is…
First of all, I’m looking at the JSE-ALSI40 (SA40.Fut) Daily chart. Next you’ll see a vertical red line. This is the line from the first public holiday 21 March 2018 – Human Rights Day. What’s interesting is that the (SA40.Fut) was moving in an uptrend from early February up ‘till 20 March 2018. This means you would have looked for long (buy) trades to trade in the direction of the trend. But with the public holidays, there was some kind of disruption which caused the market to drop and reverse the direction. Whether it was the Listeriosis outbreak, VAT increase to 15%, the ever strengthening rand or indecision about the New presidents choice of the cabinet – the market had more to juggle with than just a few public holidays. In fact, up until today, the SA40.Fut market has entered into a sideways trend which can be dangerous for a trend or breakout trader to take any positions. Whether you go long (buy) or short (sell) you could very easily get stopped out of your trade. So what I suggest is this. Take a few days to watch the market rectify itself, choose a direction and for you to adapt before you take your next high probability trade. – No position is sometimes the best decision.
Step #2: Risk a little, make a little but save your sanity
Once you’ve taken a few days to adapt and for the market to choose a direction, next step is pertinent. If you were risking on average 5% per trade, this might start you off with a panic and distress. Rather, look at risking around 2% or even 1% when you take your first trade. This way you’ll ease yourself back into the trading world without stress and anxiety. And also don’t just go and buy or sell every trade under the African sun! Start off by taking one to three trades at a time. The market still needs to adjust and if you decide to buy (go long) all six trades and the market suddenly crashes, you’ll be down 12% on your positions in just a few days. And this will kick in post-vacation stress. And the last thing I ever want for you is to develop some kind of fear, stress and anxiety when you trade. In fact, my passion is to help guide you with principles, tools and strategies I’ve learnt over the past 15 years while trading the markets. If you’d like to learn more about these kinds of trading rules, be sure to keep reading your BlackStone Futures E-letter as I’ll be writing to you on a regular basis.
“Wisdom yields Wealth”
Analyst, BlackStone Futures