Fall Trading: Watching the color of money change

By Larry Greenfield

This is the season where the active trader looks to make his/her mark. It is the time where traders leave the beach and head for the trading desk – be it at the office or at home in the basement. Hunting season is imminent and so the instincts of the fisherman, the deer hunter and equities trader are sharp and ready for action.

In my own personal experience I always found trading in the summer to be, quite frankly, the worst time. With little to no momentum volumes would dry up and you feel like you are the only one in the market akin to being on a sailing boat with no wind drifting around. That said, there were a couple of summers where trading was worthwhile as I recall. Regrettably however, both were characterized by major financial events – most recently the 2007-2008 housing market led collapse in stock valuations.

When trading in any environment you are always looking for information to give you an advantage. News, whether on the TV or flashing across the screen can at times give you an edge. Although rare, if you can catch something that no one else notices the opportunity is enormous.   One of the best trades I ever made professionally was whilst listening to CNBC during the financial crisis. The share price of financial institution Bear Stearns was down massively – 30 dollars or maybe more.   I had a short position in the stock when the news came out that Warren Buffet of Berkshire Hathaway was rumored to be taking a stake in it. Many people bought back their short, covered after hearing the news. I had my own finger on the buy button but I did not do it – the stock barely budged I added to my short position the following Monday when they finally announced they were finished. Of course, the rest of the story is history they were bought out for $10 a share but it opened on the following Monday at $3 per share.

Volatility and Volume are the Bread and Butter of Trading. The very first thing I look at when sitting down at my desk is which sectors and stocks are up the most and which are down the most. Then I look at volume. Volume is a measure of liquidity and in many cases lets you know if the stock is in play. How many days a stock is in play – whether it is over extended? Does the stock has news coming out, when are the earnings due? What is your track record when trading the stock? Charts and technical information are all part of what a good trader does when entering a position.

Happy hunting hopefully it's a profitable season without a bag limit.