Shhhhhhhhh….Be Very Very Quiet, We Are In the Doldrums

During the trading day there are certain times when the market should be avoided. Volume gets thin, and the range starts to contract. This leads to short term fake out moves and reversals that can frustrate the stock trader to no end. Even a veteran trader with a good feel for the stock market trends can find themselves pulling their hair out.

Welcome to the doldrums.

Usually, at the start of the lunch hour at 12 Noon Eastern until 1PM, the market quiets down as the “second shift” takes over the trading terminals. This time is often a maintenance period, where the trading is done on auto pilot, just to keep an orderly trade flow, without making too many waves. Unfortunately, I’ve been victim to trading through the doldrums expecting something to happen that will never

Just because we call ourselves stock “traders”, sometimes there’s a perceived urgency to put trades on. I know that when I used to stare at the screen during a big move instead of participating in it, I would feel that I’m missing the last plane off the island. I knew that there would be other opportunities, literally right around the corner, but I couldn’t help thinking that I should have been better and able to catch the move. This actually conditions us to start seeing things that aren’t there so that we don’t miss the next move, and can lead to over trading.

The truth is that the frequency that you trade only matters to the I.R.S. so you can claim day trader status. There is no set line in the sand as to how many trades you must take in order to be a successful trader. As a matter of fact, the stock trader that trades the most might actually turn out to be the one that doesn’t make any money at all.

The goal of a trader is to put a trade on when they have an edge. There is no edge when there is light volume and a contracted range. There is no edge when most of the market participants have gone to lunch and don’t want to be bothered. Wrong moves in the doldrums can give back your morning gains, or even worse, put you in the hole to start the afternoon. This leaves you in a game of catch up, and that’s not where any trader wants to be, no matter how good they are. Too many consecutive days of positive mornings ad negative afternoons will extract the confidence right form a trader’s bones.

The worst thing that can happen is that you actually make money for a few days trading the doldrums. Making gains from poor trades does nothing but reinforce bad habits, and eventually will lead to a trader’s ruin. Also, don’t get cute trying to teach yourself a lesson by trading in these times so that you will condition yourself not too. If you want to self sabotage yourself, think of a more creative way.

A trader should only do one of two things during the doldrums: eat lunch or sleep. Either of those choices beats losing money any day.

Michael “tiny” Saul

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