Top Things Ahead: VACATIONS!

I'll be on vacation for the next three weeks, but as I return in August, I'll be trading very little.

"Top Things to Watch" will only return in September, but I'll continue to write articles on topics I find relevant.

Investing through the summer requires a savvy approach to outsmart market volatility.

July is notorious for wild price swings due to earnings season.

Companies report their Q2 results, often leading to significant, unpredictable moves. Historically, the S&P 500's realized volatility can jump above 20% annualized, and in some years, over a quarter of S&P 500 stocks experience daily moves greater than 5% during their earnings windows. These are not minor fluctuations; they can significantly impact your portfolio if you're not prepared.

August is often deceptive, with its typical low volatility and thin trading volumes.

However, this quiet period can be a trap, as unexpected catalysts, like geopolitical events, natural disasters, or sudden economic shifts, can trigger outsized moves because there's less liquidity to absorb them. This means that even a minor piece of news can have an amplified effect, catching unprepared investors off guard. If you’re holding leveraged ETFs or complex derivatives, this low-volume environment can dramatically increase your risk.

Pre-Vacation Playbook: Manage Your Positions

Before you head out, think strategically about your current holdings and make a smart risk reduction approach, without panicking.

• Tighten risk: Scan your open positions to check if you are overexposed to certain assets prone to volatility (like commodities, currencies, and crypto), and/or companies' results. I'll be trimming my oversized bets and adjusting stop-loss orders just below recent support levels to avoid waking up to a nasty surprise on the beach.

• Think liquidity: Thin trading in August can mean bigger slippage. If you’re holding less liquid assets, widen your mental stop-loss bands and avoid placing tight stop orders that might trigger on an errant print.

Your Best Beach Ally: Automation

Vacation is for unplugging, not for constantly refreshing your portfolio app. This is where automation becomes your best friend.

• Program Limits and Stop Orders: Before you pack your suitcase, be sure you have consistent "stop loss" and "take profit" levels programmed into your brokerage account*. This way, your exit strategy is on autopilot, protecting your capital and securing profits even when you're completely disconnected.

• Set Up Alerts: Even if you don't plan to trade, set price and news alerts for your largest positions or specific price targets you're eyeing (perhaps to "buy the dip"). This allows you to stay passively informed without the constant need to monitor the market.

Remember: Cash is a Position

Don't underestimate the power of having cash, meaning having uninvested funds in your brokerage account. This is a legitimate position, especially during uncertain market periods. Sometimes, the smartest move is to reduce exposure as it provides flexibility to capitalize on new opportunities when you return.

By proactively managing your positions and leveraging automation, you empower your portfolio to navigate summer volatility on its own.

As the smartest traders know, sometimes, the best trade is no trade. Enjoy your well-deserved break!

*this is a practice you should have all throughout the year