There are few times during the year when trading is more frustrating than summer. Price action tends to be choppy and erratic, and I generally lose confidence that a move will continue as normal. In short, traders tend to lose confidence in what are normally “automatic” setups because the market has trouble maintaining a steady flow of orders in either direction. This loss of confidence in the market can make e-mini scalping a dim and infuriating time to trade.
Trading in the summer requires a change in your trading approach; You need to become more selective in your trading choices and make a conscious attempt to reduce the risk factor in each of your trades. In my experience, the market tends to drift slowly, whether long or short, and then it can spike one way or another, and then resume the slow drift. These are not the optimal conditions for an e-mini scalper to trade, but with a bit of foresight, you can make the most of the situation and make decent profits. Of course, my expectations for trading profits are lowered due to adverse price action, but once in a while you can have a highly profitable day. In short, I tend to lose confidence that the market will show follow through trades that can often be counted on to go in one direction.
Here are some of the techniques I employ while trading during the summer stagnation:
Lower your profit expectations so that you are not tempted into lower probability trades that have a higher chance of failing due to the erratic price action that is often part of summer trading. More specifically, I haven’t hit many home runs over the summer months, but gathering a number of singles can be an effective business technique.
Reduce the number of contracts in your trading. This will help you in case you encounter any unexpected erratic price movement. Preserving your trading capital should be more of a concern than high profits.
· It is very difficult to find a trade that runs during the summer months, so you may want to profit earlier than normal. When you take profit, be careful to manage the trade carefully and don’t let the price pull back and wipe out the profit.
· As I said earlier in this article, price action tends to slow down and the market tends to go up or down slowly. Don’t get caught in a drifting market on the wrong side of the trade. Get out of a trade that is slowly but surely moving against you to preserve capital. These slow drifts can go on for quite some time and will gradually lead you right into your stop loss. Even the simplest trade can take 3-4 times longer to complete due to low volume. (If it is a low volume day)
I can’t say that summer trading is a lot of fun, but with some changes to your trading methodology and reduced profit expectations, it can still be a moderately profitable time to trade.