Presidents’ Day: A Trader’s Guide

Depending on where you’re from, today might be celebrated under different names.

While most of us now refer to the third Monday in February as Presidents’ Day, officially, it’s still a celebration of George Washington’s Birthday.

Go figure.

Back in 1879, an Act of Congress made Washington’s Birthday a holiday for federal offices in Washington. The holiday expanded to include all federal offices in 1885.

Until 1971, Washington’s Birthday was celebrated on February 22 — his birthday — each year.

In 1971, Congress got involved again and passed a law making most federal holidays occur on a Monday. At the same time, they moved the celebration of Washington’s Birthday to the 3rd Monday in February.

Which means, if you do the math, it never occurs on Washington’s actual birthday anymore. Sorry, George.

In the U.S., Presidents’ Day is an official stock and bond market holiday.

Other markets around the world are open as usual. Also, forex markets and foreign futures markets are open, but trading is thin because the banks are closed and brokers take the day off.

Not the best time to trade those markets. But there is something you could do today.

Study Up: The Truth About Success

“Every expert was once a beginner.”

— Rutherford B. Hayes, 19th President of the United States

My opinion on how to spend stock market holidays…

… study, study, study.

And this isn’t just about trading — it applies to anything in life you want to do well.

Back in high school, I became obsessed with winning and training hard as a tennis player.

I practiced like crazy, but lost in the finals of the Class L State High School Tennis Championships as a junior — in a third-set tiebreaker, no less!

I was determined to win it all the next year. I was on a mission.

Truth be told, I overtrained because I ended up with an injury requiring surgery. That was the end of my tennis career.

But what I hope you understand from my story is that if you really want something, you put in the effort.

Notice I didn’t guarantee your success.

I can’t guarantee you’ll become a successful trader. But I can tell you that I will continue to teach you what you need to know in Tim Sykes Daily. It’s your job to put in the effort.

How Does the Presidents’ Day Holiday Affect the Stock Market?

I can’t remember the exact statistic, but something like three-quarters of stocks follow the overall market trend on any given day.

If the markets are up, then most stocks are up. And vice versa.

So what happens in the stock market around Presidents’ Day? First, let’s take a look at holiday trading in general.

Trading the Three Days Before and After Holidays

According to the “Stock Trader’s Almanac,” in the past, stock indexes tended to rise before a holiday and fall in post-holiday sell-offs.

But in recent years, each holiday has taken on its own character — so the old idea of buying into the holiday doesn’t necessarily pay off.

Presidents’ Day Is the Least Bullish of Holidays

Also from the “Stock Trader’s Almanac”: Presidents’ Day is the least bullish of the formal holidays.

Their statistics cover the day before and the three days after the holiday. On average, the four major indexes (S&P500, DJIA, Nasdaq, Russell 2K) have been down on the last day of trading before President’s Day between 1980 and 2017.

And on the days following Presidents’ Day? On average, all four major indexes have been down the three trading days after Presidents’ Day over the same period.

Post Presidents’ Day Stock Market Projections

Did you notice I didn’t say the four indexes were down every year? That’s important.

This isn’t an exact science. If it were that easy, we could all take most of the year off. Then we could short-sell index funds on those days and make a killing.

But what does all this mean for you as a trader? To be clear, it might not mean anything. But it’s good to know the history and seasonal cycles of the markets.

“But, why?” you ask…

Because for every block of shares you buy, someone is selling. And for every block of shares you sell, someone is buying.

The more you know about the markets — and market psychology — the better. Be smarter than the next trader.

At the very least, be more knowledgeable. Develop the right trading psychology.

So what should you be doing today?

Instead of taking the day off completely, why not put in a long day of study? Prepare for the rest of the week.

“Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude.”

— Thomas Jefferson, 3rd President of the United States

Know Your Trading Strategy

I don’t care what day of the year it is. Or whether you trade the U.S. markets or foreign markets.

It doesn’t matter if you trade penny stocks or options. It doesn’t matter what you trade. You need to go in with a strategy.

If you can’t clearly define your trading strategy … and explain it in simple terms to someone who asks … then you better step back and study some more. No degenerate gambler BS. Don’t trade blindly.

Know your strategy and follow it.

My Strategy?

I look for several criteria, but almost always start with these …

First, I look for the biggest percent gainers for the day. At the end of the trading day or during pre-market hours, depending on where I am in the world, I screen for those stocks.

Then I look to see how the stock has traded in the past and whether there is a news catalyst driving the price movement.

Then I do some research to see what the news is and try to form an idea about whether the stock should be on my watchlist.

I also look for volatility and volume.

I look at float — the number of shares available to trade — to determine how that might affect supply and demand should the stock keep moving.

Which leads me to my next point about what you should be doing on Presidents’ Day …

Create a Trading Plan

Every trade you make — every single one — should start with a plan. Especially if you have less than a decade of experience. But even after that, you should still use them for every trade.

Why? Because trading plans are incredibly useful.

I often get asked what should be included in a trading plan.

I hope you’ve figured out that your watchlist, in many ways, represents your trading plan. At least it’s the start of your plan.

The watchlist is kind of like saying, “Here are the opportunities available to me.” Then, you start to go deeper and decide what you would do with each of those opportunities.

This is one of the reasons you don’t need a massive watchlist. Ten stocks are plenty, and maybe even too many at first.

So while everyone else is taking Presidents’ Day off, put together a watchlist and create a trading plan.

If you have zero ideas about finding stocks to watch at this point, re-read this article because I’ve given a lot of tips. So far, I’ve mentioned this…

• Know your strategy.

• Make a trading plan.

• Have a watchlist.

That’s all preparation. It’s what we do to try and protect ourselves and get ahead.

The way to prepare?

Study. Study like crazy. Study like it’s the most important thing you can do.

Does this mean you should never take time off to rest? No. You need rest.

But build the habit of studying and a strong work ethic. Then, when you rest, it will be with a peace of mind rather than a false hope for change.

Keep Seeking Knowledge

No matter what …

Never. Stop. Learning.

Life is an incredible journey if you have the right attitude and keep soaking up knowledge.

Presidents’ Day is an official stock market holiday. Which makes it a great day for you to study.

Figure out what you want to learn, make a plan to study, and execute your plan.

Set some goals — say, what you want to learn in the next 12 months. Then break it down into 90-day chunks. Then monthly and weekly goals. Then get to work!

Finally, a little tough love from the nation’s 26th President …

“If you could kick the person in the pants responsible for most of your trouble, you wouldn’t sit for a month.”

— Theodore Roosevelt, 26th President of the United States

Are you a trader? How will you apply the ideas I shared today? What do you do every day to prepare for trading? Let me know at [email protected].

Cheers,

Tim SykesEditor, Tim Sykes Daily