It's that time of the year again - school holidays. I'm often asked what people should do with trading positions when on holidays. Unfortunately there is no simple answer. For example, are you away for 2‐days, 2‐weeks or 2‐months? Will there be reliable and secure internet access at your destination? (TIP: Do not login to a trading account using free Wi‐Fi). Do you have a hand‐held device that allows access? What are current market conditions?
Whilst each holiday will be different, here are some ideas...
A Real Holiday
Strange as it may sound, there is more to life than work and there is more to life than trading and the markets. If you're going away to unwind and recharge your batteries then do exactly that ‐ close all positions and turn your trading brain off. If you're touring several countries, the last thing you want to worry about is logging into your trading account at the next village. The markets will be there when you return. If you intend to sit under a palm tree sipping cocktails, make sure you only read fiction. Leave all trading books at home. Use your holiday to switch off and truly escape. You may not get the chance to relax for quite some time - so take advantage of it.
A Working Holiday
As trading is a business if you decide to trade whilst on holidays you are effectively on a working holiday. Things to consider will include:
→ Is the market strong and trending well, for example, like we saw in 2005 ‐ 2007?
→ Is it choppy and sideways, like it was in 2010 ‐ 2012?
→ What type of strategy are you trading; short term like the Power Setups, or longer term positions like the Growth Portfolio?
→ If you have short term positions and the market is strong you can place a stop loss, preferably at breakeven or better, and then roll that dice. I say ‘roll the dice’ because some of these positions may get stopped out whilst others may keep tracking well. (Remember - if there is some kind of corporate action then all standing orders will be purged from the system ‐ including your stop loss. Now you may have a problem).
The other scenario is earnings releases when trading US shares. As a rule of thumb we always recommend exiting positions ahead of any earnings releases, but if you're away then you may not realize the season is here. Remember that the US earnings season extends for a month or two. Unless you're trading the High Frequency Strategy we recommend positions be closed before earnings.
Obviously longer term trends take time to develop and run their course. In certain circumstances failure to get on‐board the rising trend near its start can be very costly if missed. In other words, you need to try and do everything you can to catch that trend. A personal example was 2010. Between January and September my own account fluctuated between +8% and ‐8% but in the last few months the market offered some great trends and I was able to add 24% to finish the year nicely ahead. Had I been away when those trends began, I would have missed the significant gains and probably finished off with a mediocre year. So the issue when trading longer term is not so much managing open trades, but missing out when trends start and you staying in cash.
In summary, I do not have an appropriate answer for the signal entries apart from standing aside. Relying on a friend or family member opens up security issues as well as copyright/confidentiality breaches.
In terms of managing open positions within a longer term portfolio, again we can exit if we feel dubious about the market trend however I never like to close the door on positions simply for the sake of doing so. I'd rather allow the market to take me out of a position on the reversing trend. If you use an 'on close' exit mechanism like we use for the Growth Portfolio, then maybe place a 'catastrophe stop' a fair distance away from current price action ‐ something like 30% to 40%. This is a ‘just‐in‐case’ scenario which ideally won't come into play but would give you peace of mind that you’ll be taken out if something drastic occurs.
Managing these longer term trades really depends on your time away and connectivity. If you're only away for a week or even two, then I'd let the positions run their course. If trends are stronger then it is less likely any action will be required. I travelled to the US in early 2011 for a month and never logged into my account. The market was strong and trends remained firm and I felt content that not much untoward was going to occur. Longer term systems allow more room so the impact of short term gyrations in the trend tend not to generate signals.
If you have secure connectivity, even intermittently such as once a week, then I'd certainly let positions run and just check in when you can. Being longer term in nature, it won't matter a great deal in the bigger picture if an exit is missed by a few days. The same is true for new entries. When we're looking for swings amounting to many dollars, a few cents here and there won't drag on performance.
Enjoy your holiday!