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Coach's Playbook Posted by Team Topstep June 2, 2022

Trading Slow Markets

This week, the Topstep coaches are talking about trading around holidays or historically slow times. Now, we haven’t had a summer slowdown since the Covid-19 pandemic started, and with all of the economic and geopolitical headlines dropping daily, that trend will likely continue this summer. However, we have a few more holidays coming up on the calendar, such as the 4th of July and Labor Day. So, here are some more pro tips for preserving capital when market participation drops!

Expectations

While there will be opportunities to make a few trades, you really shouldn’t expect to hit many home runs when trading slows down. But, conversely, this is the time for belt-tightening. So it might be good to consider scaling back on your profit targets and narrowing down your risk parameters to avoid getting chopped up in smaller trading ranges.

Risk Management

Without a doubt, scale back on your trading size. Like we’ve already said, there will be opportunities, but there will likely not be a whole lot of them, which means you might not get a chance to make your money back if you get caught on the wrong side of the market.

This leads to another point; know the market environment you’re trading in. Are the swings wide or narrow? Are your setups taking a long time to form and play out? What do the volume patterns look like? Is volatility affecting liquidity? Based on your answers to these questions, you may need to make an adjustment and look at longer or shorter timeframes.

Take Time Off

You don’t necessarily need to avoid the markets altogether, but there’s nothing wrong with being an active observer. Being an active observer simply means watching how the market behaves, taking note of any anomalies, and jotting them down in your trading journal. Doing this will give you a reference point for the next holiday or slow trading period. 

You can also spend some time on professional development. Read a book, research a new tool or indicator, anything to make you a better trader today than you were yesterday.

Trade Well!