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Trader Alert: Beware of New Year Whipsaws and False Starts
I published this article (see below) seven years ago and I like to repeat the warning each year. This year is no different as it pays to keep what I say in mind.
This is not to say end-of-year trends will or will not continue into the new year. Just be aware that the first week is often characterized by false starts as markets are not yet trading with a full deck.
So this is where we stand now as markets look to retore liquidity after long holiday breaks. It may not be until next week when the market starts trading with full liquidity. I would be remiss if I did not put in a plug for the Amazing Trader as it makes sense of price action and offers trading opportunities in both times of trends or false starts/whipsaws.
Warning: Beware of New Year Whipsaws
January 6, 2015
While this year may turn out to be different given key events later in the month (i.e. ECB meeting and Greek elections), I would be remiss not to give a warning to beware of a New Year whipsaw. I have seen it happen too many times as this is not a typical week and how markets end it may be more important than how they begin.
I can sum it up by posting a trading tip I wrote around one year ago. It was the first one in my series of forex trading tips and I am reposting it now given the time of the year.
As a rule I am wary of start-of-the-year moves and there are times I do not look to trade until a full week is in. One reason may be muscle memory from a long time ago where I got caught in a whipsaw during the first week and it took a long time to dig out of that hole. I have seen too many starts of a New Year false starts not to keep me cautious betting on early trends continuing. So my Tip of the Week is just to be aware of early in the year moves and keep it close to the vest until full liquidity returns to markets.
This can also occur to a lesser extent at the start of a new quarter and after summer ends.
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