It's officially summer but what exactly does that mean for your stocks? Today, I'll share with you what summer means for your money if you're trading or investing in the stock market.
How Summer Affects Your Trading and Investing
After getting into the stock market, new traders and investors get to the summer season and wonder what's "wrong" with their investments or trading technique. There's nothing wrong.
Maybe you've heard the saying "Sell in May and go away"? Summer for the stock market is about mid-May to about mid-October. This is usually a very slow time of the year in the stock market so many traders will sell their positions and take the summer off from trading or take a summer vacation with their family since their kids are out of school. This where the saying comes from.
I personally don't take the summer off.
I just know and expect the market to behave a certain way
Stock prices move a lot slower or a lot "choppier" during the summer. The market will be up one day, down the next day. Again this is because during the summer there are fewer people trading and investing in the stock market.
If you are investing in the stock market, don't look at the day-to-day movement. Look at how your stocks move over a longer timeframe such as a few months to a year. Looking at the day-to-day movement will cause you to sell when it's not the right time to sell your investments.
If you are trading the stock market, you can expect your trades to happen quicker. You will get in a trade and the stock price will reach your sell price a lot faster during this time of year. You should also expect less of a movement or profit during this time.
Since there are fewer people actually trading and investing during the summer, the volume (number of shares being bought and sold) will be a lot lower. Stocks don't move as much during the summer as they do in December so going into your trades knowing this will help you set the right exit plan.
For example, in July if you know a certain stock moves $.50 per day then you may be able to expect it to move $1.00 per day in December.
This is how I approach my trading and investing during the summer because I know stocks are not going to move as much as they usually do throughout the rest of the year.
Join the Conversation
Have you sold a stock during the summer because you thought it wasn't doing well anymore? Let's talk about it in the comments.