Well, gang, it’s election time once again, and a highly emotionally charged one at that. So how can you prepare for trading the election — and beyond?
I’ve been getting questions about that in the SteadyTrade Team community and about what I think will happen. So if you’re gearing up to approach this crazy market…
It’s smart to think and plan ahead. Especially in a crazy volatile year like 2020 and around a highly charged and intense election.
So what can traders expect come November 3? No, I’m not getting political. Let’s break down what we might see in the markets. Read on to learn what I think traders need to watch for and which stocks I’ll watch after the election.
Let’s get straight to what you need to know about trading the election and beyond!
Table of Contents
- 1 Why Elections Offer Can Awesome Trading Opportunities
- 2 Trading the Election: What Happened in 2016?
- 3 Bohen’s Tips for Trading the Election Volatility
- 4 Bohen’s Big Election Prediction
- 5 Use StocksToTrade for Trading the Election
- 6 Trading the Election Trading: Bottom Line
- 7 One Platform. One System. Every Tool
Why Elections Offer Can Awesome Trading Opportunities
One of the great things about being a trader is that you can have a good time in the election season, no matter who wins…
That’s because presidential elections generally cause a lot of volatility in the markets. And volatility can mean awesome trade setups for well-prepared traders.
But why do elections bring volatility? There are many reasons…
The key thing to understand is that markets hate uncertainty.
Markets work in ways to forecast and price in the future. When we elect a new president, the market has to suddenly digest all the information about what could happen in the country over the next four years.
Investors, traders, hedge funds, mutual funds, and central banks all make a mad rush to shuffle their investments and trading positions. All that activity can push the prices of stocks and other assets up and down.
For short-term traders and day traders, this feels great. Kinda like when an obsessed surf bum paddles out to catch some waves during a major storm.
I’ll give you my market prediction in a bit, but first, let’s examine what the stock market did after the last presidential election…
Trading the Election: What Happened in 2016?
If you want smart tips for trading the election, look to the past. I remember the election cycle of 2016 … What a heck of a year.
Back then, President Donald Trump was just a guy everyone knew as a real estate mogul and TV star with a whacky hairdo. He ran a hugely unorthodox campaign and shocked the world when he defeated Hillary Clinton.
At the time, nearly everyone — the media, polls, betting odds, and social media — believed Clinton would take the win…
So when things didn’t go that way, it shocked the world. The stock market saw a sudden, sharp sell-off immediately after the results were announced.
The reason? Most likely because so many traders and investors were caught off guard. They had listened to the media and the polls. Then suddenly the world was going to be substantially different. Most of them didn’t have a game plan…
There were some amazing short-biased trading setups for nimble traders in that sell-off, but what came next was even better.
The market quickly began to realize that Trump’s policies were positive for the economy. We saw the market quickly start to rebound on what a lot of media pundits dubbed the ‘Trump stock market rally.’
That turned into one of history’s greatest bull markets. We saw the market and the American economy build more and more strength until we hit the pandemic.
The media and the polls are once again saying Trump’s unlikely to win … So will we see a repeat of last time? Nobody knows for sure, but we do know that well-prepared traders will love the volatility.
Bohen’s Tips for Trading the Election Volatility
Trading volatile markets can be tricky at the best of times, so it’s important to have a game plan well before Election Day.
Here are some of my best tips and tricks for handling the upcoming crazy market moves…
Be in Cash Before the Election
In your trading account, you can either be long or short a stock, or you can stay in cash.
Keeping your capital in cash, rather than in a stock position, keeps it safe. It also allows you to best react to the market, whether it goes up or down.
Be aware that sudden market volatility can blow right through your stop-loss levels. That can make it very difficult to manage your risk. Keep that in mind if you’re planning on trading the election.
Smart traders don’t predict the market. Instead, they wait for the market to tip its hat as to the likely future direction, then intelligently place trades.
Get a better handle on volatility now! Check out this no-cost “Volatility Survival Guide” I helped Tim Sykes with. It can help you understand how to navigate these fast and crazy moves in any market.
Wait for the Trend to Develop and Chart Patterns to Form
Something I’ve noticed over the years is that when market volatility heats up, traders lose their heads and start trading like Wild West gunslingers.
Remember to be smart and treat your trading like a business. Only place a trade when the setup lines up and fits your strategy.
How do you know when the odds are in your favor? You make sure that the market is trending in the direction of your trade. And that you see a logical chart pattern that fits your trading plan.
Don’t have a set trading plan or favorite trading pattern yet? Don’t worry, check out this post or this post to get you started…
Trade Smaller Size
When markets are volatile — like when you’re trading the election — it’s harder to manage your risk.
Markets slosh around and easily hit your stop-loss if it’s too tight. It can even possibly burst through your stop-level and give you a terrible fill…
On the plus side, the market can often hit your profit target levels quickly and even offer some amazing potential risk/reward situations.
The first step of intelligent trading is managing your risk. So it’s a good idea to trade smaller positions and risk a smaller percentage of your account, in case the market blows through your stops.
Bohen’s Big Election Prediction
It’s time for me to stick my neck out and make my big prediction on what’s going to happen this election…
Let me first say that I’ll have a good time trading the market volatility, no matter who wins…
With that out of the way, I personally think we’ll see a repeat of what happened in 2016. Trump’s going to once again upset the establishment with a seemingly come-from-behind win.
I know he’s a polarizing figure. But it’s obvious that before the pandemic, we had the strongest economy ever. Things really seemed good on many fronts…
Even with the protests, lockdown, and tragedy we’ve seen in the past nine months, I still don’t think Americans have forgotten that we were doing really great not too long ago. We can soon get back pushing ahead full speed in the near future…
I think if Trump wins we’ll see a sudden sell-off in stocks, as much of the media and the polls are predicting a Biden win…
Then I think we can swing back into a strong bull market. So that brings me to … which stocks will I focus on for trading the election and after it?
Stocks to Watch if the Market Rebounds
So my thesis is that Trump pulls off another surprise win, the market gets shocked, and then the good times resume…
If that pans out, the stocks I’d watch are companies involved in our new, digital, socially distanced way of life.
The work-from-home stocks, the 5G tech stocks, the FANGs, and other big software companies … For me, it’s all about the companies helping us as we move to smaller towns due to the booming remote-work culture.
We can see this trend playing out already, and I think it’ll only get bigger and better.
Use StocksToTrade for Trading the Election
If you want to make it in the markets, it’s important to have the best tools at your disposal. This is at least 10 times as true for when the markets are volatile.
Stock scanners, charts, breaking news alerts, Oracle trade alerts, indicators, watchlists, and more — these are all things that can help you find awesome trading setups…
And they’re all available in one platform, StocksToTrade. See why many of the world’s top traders use our trading platform to battle the markets each day. Get your 14-day trial for just $7!
Trading the Election Trading: Bottom Line
No matter what happens in this election, for day traders and swing traders, there will be plenty of trading opportunities. But to ride the momentum, you have to be well prepared…
Make sure to read the above tips closely and understand what’s possible.
One of the most important takeaways is that cash is a position, and probably the best for most traders at election time.
Make sure to thoroughly prepare to trade volatile markets, with a careful trading plan, well-researched chart patterns, and a solid trading platform.
Ready to step up your game and learn just about everything I could ever teach you about the markets? Come join the SteadyTrade Team, our elite trader education community. I look forward to seeing you in chat!
Will you be out of the market and entirely in cash on Election Day of 2020? Tell me what you think below!
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