It’s the 30th of April and tomorrow, is the 1st of May… I know, I don’t have to tell you that. But there are people asking about the “Sell in May and go away” “saying” in Trading / stockmarket. OK, first, yes, historically, this is a weak month for stocks. Many people want to know why. Some people are asking what to do. But before I share my thoughts, I note a few things happening this week, and so, you might want to hold on for a while on the “selling” thoughts.
1. US Federal Reserve is going meet again, Tuesday (that’s tonight Aussie/Asian timezones) and expected to come out with a statement following their two day meeting. People expect that because the GDP number is low (2.5 instead of the expected 3), that the stimulus will be kept going.
2. European Central Bank is meeting on 2nd of May (Thursday night) and they are also expected to stimulate the economy with an interest rate cut.
3. Dividend payouts – if you want to receive dividends (particularly if taxes are paid on it)
These events typically cause rise in stock prices (investors are anticipating stimulus already it seems with the 106 points rise in the US overnight.)
So, there’s another major “opportunity”.
In the last few years that I have been trading, I don’t take a lot of opportunities. I like big to catch the big moves mainly because my position size (or how the amount of shares I transact with is not that big and so I have to be conscious of the cost of trading, plus making sure that the profit (or potential reward) is big enough for me to spend energy and time on. For example, if you trade 1000 shares with $100 cost, your profit has to be more than 10 cents per share in order to breakeven. Whereas, if you have 5000 shares, with the same $100 cost, you only need to make 2cents increase per share to breakeven. So the next thing to consider in your trading system, is the opportunity that you take given your position size.
The reverse could be true ( and I am sooo guilty of this early on), we trade frequently even if the system does not give you the opportunity (I know, it could be a painful wait sometimes for trades to move in our favor to “ripen” up.) But stay with a proven system, that’s the only way to make the money consistently. When you find yourself “cheering” for your stocks — like I was doing this morning 🙂 it’s a sign that you are ahead of your opportunities. Why not write a blog to while away the time? Hah!
Get updates at these news articles :
http://www.bloomberg.com/news/2013-04-29/fed-may-shift-talks-toward-more-stimulus-el-erian-says.html
http://www.bloomberg.com/news/2013-04-29/wti-crude-rises-on-optimism-about-economic-stimulus.html
