I’ve been day trading during the holiday season for several years now, and I’ve noticed that they all have several things in common.

Typically, holiday day trading is more volatile than usual. My theory is that it happens because more people are at home trading, and there’s an unusually high inflow of beginners. And since many traders are long-biased when they’re just starting out, that changes the way the trades unfold. Tickers start getting weird spikes at 100%  and fail out of nowhere.

Additionally, stocks squeeze left and right. Frankly speaking, long-biased day traders are better off right around the holidays. Multiple day runners that look like they’re about to fail suddenly recover to the new highs. Reliable patterns don’t seem to function like they normally do.

As a short seller myself, I have to adapt to this situation. Based on my experience of holiday trading for several seasons, these are my recommendations:

• Wait for a superior signal.
• Watch out for squeezes.
• Be extra careful trading pre-market.
• Expect increased volatility during the Christmas week and till New Years.

Since more people work from home on the regular this year due to Covid, I’m really curious to see what this holiday season will be like. Before it, the same story seemed to repeat year after year, but who knows how this season will go. What are your predictions? Do tell in the comments below!

Meanwhile, I can tell you how it went last year. In December 2019, I decided to ignore my P&L chart for the whole month. I haven’t looked at my daily charts, and I haven’t posted a single trade for the whole month. That gave me a certain peace of mind.

I had a clear head no matter if I lost or won. It was great since I could lose and go into a new trade without being negatively affected by that loss. Emotional trading was way less common, and I could honestly say that I enjoyed the process of day trading again.

Of course, that doesn’t mean that I didn’t lose anymore. That Christmas week, I had two red days back to back. However, the losses were small, under 1R. I was getting better at managing them, and that was a huge improvement.

Mirages vs A Tickers

On Friday, Dec 27, 2019, there were many movers and plays available on the market. A lot of people were tweeting about various setups and how many of them they were keeping an eye on. I could easily see why people were getting so excited. However, I had already become much more selective about my trades.

You see, there are many mediocre setups out there. I call them mirages. They are the stocks that seem like they kind of fit your criteria, but they lack true potential. You may even make some money on them, but in fact, spending time and effort on them will likely make you miss the real opportunity, another much stronger setup.

Apart from opportunity cost, paying too much attention to subprime setups negatively impacts your day trading habits. When you’re surrounded by the OK stuff, it’s harder to tell a true A ticker apart. A disciplined day trader is supposed to wait for the key strategy and a strong signal to enter the trade. And when your standards are too low, it gets hard to see the signals that are loud and clear; there’s simply too much noise around you to catch them on time.

And again, following all rules won’t guarantee that you’ll never experience losses. That day, I had two losses on my prime setup that I won 70% of the time. But the market was changing, and things weren’t working as they normally did. At first, I tried to jump back in since the setup was still solid, but then I noticed that the stock was rotating its float. Given how volatile the market has been that week, I withdrew almost immediately. I accepted that I was wrong those two times and chose to cut my losses.

In a situation like that, it’s important to take the context into account. In that case, I had to deal with an unstable holiday market, and I had to make corrections.

 In an hour or so, I saw another setup that was unfolding perfectly. I took the opportunity and entered the trade. However, I only did it because the setup was so perfect, and the signal was clear that it was about to break down. Unfortunately, I didn’t follow my plan all the way and got out of the trade too early. On the bright side, this decision wasn’t entirely emotional and had a valid logical reason.

After all, there were a ton of squeezes earlier that day, and I didn’t want this one to squeeze too. I should’ve just let the trade unfold in hindsight, but I took off a bit early. The ticker ended up going down all the way to my profit target without me. And even though I wasn’t entirely happy with the way I traded it, I managed to brush it off. A while after that, I saw another great setup that I traded well. By the end of the day, I was proud of my gains and my discipline.

Rediscovering Big Caps

Another thing that was different in December was my attention to big cap stocks. As I found out, they trended very nicely and moved way slower than penny stocks. Since I was trading part-time, that worked well for me. Sometimes they took all day to break down, but that was fine thanks to automation. I could skip the stress induced by unpredictable penny stock squeezes, and I was comfortable trading big caps from work or from home.

It took a while to adjust my trading routine to having a day job. However, within a month, I had my ideal part-time day trading recipe:

• I have a watchlist prepared the night before or early in the morning.
• I utilize alerts for the stocks that I’m tracking. When my alert goes off, I double-check the ticker, making sure that my conditions are met. If they are, I can consider entering the trade.
• I don’t jump into a trade just because the alert goes off. It’s important to see how the stock has been acting prior to the alert, so I spend an extra minute analyzing the setup.
• Once I decide to enter the trade, I auto-set my profit target and a stop-loss order. Now I have the alerts set to go off whenever the ticker approaches either one of them.
• And even when I work from home, I try to set the trades in the first hour and then go about my business. 90% of my trades happen in the morning, which is very convenient.

I’ve said it before, and I’ll say it again. If you do your homework, you can have your day trading done on autopilot. Once you know what works, you can schedule your day around your day trading habits.

For me, if I don’t see any worthy trades in the first hour, I’d rather not trade at all. And of course, it may be different for you. Some people are great at trading at specific times: pre-market, mid-day, or in the last hour. Whatever works for you, keep doing it. The point is, you can use alerts to your advantage.

Do you rely on alerts and stop-loss orders when day trading? I’d love to hear your take on them!