Starting from this week, I will be attending a few too many Xmas parties to be able to post regularly and meaningfully so expect sporadic posts until the New Year. But here’s a couple of random thoughts / observations:

In certain work places, especially financial institutions, internal compliance rules prevent employees from trading too actively on their personal account. The rules usually prohibit selling positions under 30 days or some other similar timeframe. This is partly to stop part time day trading which distracts people from their jobs, but also makes it easier for compliance departments to monitor people’s trades and catch insider/illegal trades. Whatever the merits of these rules are, in my experience, novices and intermediate traders who follow these rules to the letter actually turn out to be better traders than those who don’t follow it. This is because the rule forces them to look months ahead and be damn sure before committing their money. If you are starting out trading, I would seriously advise you to impose similar rules on yourself. This will train your discipline, which is in my mind #1 attribute to have in order to be a successful trader. At certain times of the year, I also try to take time away from my portfolio. On the whole I am usually pleasantly surprised at how things turn out after some time away. This is because a well planned trade has only to run its course and time is on its side.

Okay now here’s the dig: in the US, taxes are filed and bonuses are usually paid out at the year end too (Morgan Stanley is announcing bonuses today and Goldman Sachs did theirs a few days ago). The street is flush with money and people are wondering what to buy for Xmas. This is naturally the most opportune time to take that well deserved break from your portfolio. The effect of this on the market is that liquidity is taken out of it, and the stock market goes into neutral. As you can see, all major indices have now hit resistance and some have been doing so for a few weeks already. If you ask your broker, he will probably give you the same explanation. Now the natural inclination for new traders is to think: “Okay, there’s no action left on the table. I should just leave now and come back when the other players are back. Otherwise I may get killed by volatility. ”

However, my view is that if you are a medium to long-term trader (i.e. your positions last more than 30 days), this is in fact a great time to put on some positions, especially for counters whose prices are driven lower by profit taking in the run up to Xmas. When the fund managers and bankers come back after the New Year, they will start looking for things to put their money back into, and by then you will be sitting ready - like a surfer waiting for that big wave to ride on. So aim to have some ideas ready for the driest period of all - between Xmas and New Year. I have marked 28-29 Dec as a trigger date for me to go long some shares. Baring any unforeseen events, I expect my broker to work hard for me on that day.

So there are many times when you should take a break from the portfolio, but Xmas is rarely the time if you are a serious private trader.