Trading The Cruelest Month

Like clockwork, summer has hit its stride and the market has hit a wall. The past few weeks have seen my P/L narrow to a pinpoint as momentum has all but disappeared in the opening days of August.

Overall, while I am green over this past week, it’s only by about $650. Part of this is just the lack of momentum I mentioned above. My average winning trade this week is just over $1100. 

On the other hand, my average loss was about $900. Although that’s about average for me, those losses point to the bigger issue traders face heading into the dog days of summer trading: avoiding losing trades.

Of course, traders always want to do that. Losing trades will happen, but they’re usually counterbalanced by more, and bigger, winning trades. However, when this kind of summer slowdown hits and there is significantly less follow-through in the market, it’s harder to both avoid losing trades and maximize winning trades. 

But like I said, this isn’t unexpected, and I’m not sweating the heat. Even though August is historically the worst month for trading, personally and universally, I’ve adapted my approach to making the most of the market we find ourselves in.

For starters, I’ve lowered my daily profit goal from $2,000 to $1,0000. This shift means limiting my initial share size and overall being more selective in the stocks I trade. That also means I’m willing to sit on my hands if I don’t see any A+ setups on my momentum scanners. 

Simply put, I’m shifting into low gear until I can see some indication that the market is ready to trade again. That might be next week, or next month I can’t say. I only know that, eventually, momentum will return, and I want to have the capital to make the most of that.

Warrior Trading is a content partner of Benzinga