​The Day After a Holiday

It's the day after a holiday. Are you going to trade today? Some traders believe that stock prices tend to rise the day after a holiday.

Perhaps you have anticipated a rise in prices, and are holding a few positions in the hopes that you can sell into the strength brought on by the holiday.

Nevertheless, the day before the holiday there's going to be less trading, just by the mere fact that the traders are leaving early.

Who knows what will happen? Historical studies may support the claim that prices go up after a holiday, but history doesn't always repeat itself. You might consider taking another day off. Why not make it a four-day weekend? If you want to trade the markets profitably in the long run, it is essential to get your rest. Trading takes mental stamina, and if you trade the markets too long without a break, you will soon find that you cannot concentrate fully.

Research studies have demonstrated that when people's mental resources are taxed to the limit, they make impulsive mistakes.

Maintaining discipline takes mental energy, and when you use it up, you have to rest. Just like a muscle, when you are worn out, you need to take a break and regain your strength. It's vital to consider that the mind has limited energy, and that after putting in a hard and tedious effort, you must take a rest and rejuvenate, so you can face the market action with a renewed sense of vigor. Holidays are one of the best times to stand aside and regain your composure.

Trading often comes down to performing in a peak performance state at a few key moments. To take advantage of these key moments, you must be relaxed. If you have strained your mental "muscles," you'll have difficulty taking advantage of these opportunities. Your mind will be elsewhere, or you'll be too tired to act decisively. When you're tired, it's hard to gauge market action accurately. You'll be prone to decision-making biases and you may act impulsively because you are too tired to patiently wait for the proper signals to enter or exit a trade. By staying relaxed, yet full of energy, you'll be able to trade in a logical and disciplined manner.

You don't need to perform at a peak performance state every minute of your life. Many people can work for only a limited number of hours a day, and if we try to work in marathon stretches, it eventually catches up with us as is shown by our weak performance. Just as a runner must rest when his or her muscles ache, it's vital to take breaks after a marathon work session.

Part of trading profitably is the acknowledgment of your limitations, and putting together sensible ways to work around them. Don't think you are superhuman. Take a few days off to rest and regain your mental and physical strength. Get plenty of rest so that next week you will be ready to handle whatever the market throws at you.

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