Dealing with the summer doldrums

“Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, preferably one that is sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading.”

– Mark Weinstein, “Market Wizard”

The above quote sums up a lot of my trading these days. Waiting, waiting, waiting. Endlessly waiting for the right trade environment, set-up or opportunity.  I think it was Jesse Livermore who said:

“After spending many years in Wall Street and after making and losing millions of dollars I
want to tell you this: It never was my thinking that made the big money for me. It always was
my sitting.”

I can understand what Jesse meant when he talked about that. However it makes it hard when there’s lots of price movement (lets face it there’s always lots of price movement) and you want to jump on-board for a few cheeky pips.  It take a lot of patience and restraint to hold back and wait for the right time.  i appreciate that many of us (myself included) struggle with that notion. Especially in the 24/7 connected, instant gratification, action orientated environment we live in these days.  It’s no wonder that wannabe traders fall prey to impulsive over-trading!

This can be even more challenging during the summer doldrums.  Historically the summer months have always been dreary for trading. However since 2007 and the GFC; July , August and early September have been volatile and provided opportunities (mainly due to skeletons emerging from very dirty closets!).  However this summer has been relatively dull (even considering the threat of war in Syria and the effect that’s had on Oil and Gold prices).

Take a look at this daily chart of EURJPY to emphasise my point. After a great run from November 2012 prices peaked at 133.79 on May 22nd and have gone no higher since. In fact after a sharp sell off from the 22nd (profit-taking before long summer holidays anyone?) Price has really been range-bound (or even compressing into a triangle if you like those kind of things, but has not really done anything overall. This is interesting when we think that despite Euro strength and Yen weakness prices has not really gone anywhere.

Now some of you may remember last year when in early September Mario Draghi came out and basically said ‘we’ll buy everything’ in order to keep the Euro together and the markets subsequently took-off. So far that has not really happened this September.  Will Syria play a part? Well at the moment Putin is giving Obama the run-around and is working him hard whilst out-boxing him. That may change but I think we’re still at a stalemate position as of today. it’ll be interesting to see what the German Elections on the 22nd will bring (personally I cant see anything other than a Merkel win, but please feel free to provide an alternative view).  Either way it’s going to take something to shake the markets out of their lethargy.

Whatever it takes just remember that its about quality of trades not quantity. If that means you sit on the sidelines for a few weeks waiting for the opportunity to come to you then that’s what you do. Chasing trades never ends nicely.

Until next time, trade well.

Paul