(Video: Market coach Doug Hirschhorn, PhD, discusses how investors can position themselves for a strong 2010.)
Traders at banks and hedge funds get paid once a year, at the very end. Since most traders on Wall Street did not get paid much, if anything, last year, this years’ profits are even more valuable to them.
So what does that mean for the risk takers out there? It means the closer we get to the end of the year, the less interested traders are in putting on big risk. At this late stage of the game, the risk/reward for them is just not good enough.
What does that mean for the markets?
It means less competition from the big players and lower volume across the board. As a result, there are more quick rallies and dips along the way.
Here’s the good news: If you’re a smaller, short-term trader, there are fantastic opportunities to make some quick profits.
On the other hand, if you’re a medium or longer-term investor, you have a great chance to find excellent entry levels into positions for next year.
The take-away for this week is you should stick around and seek out opportunities in the markets, while the big players sit on the sidelines.
Think better, invest smarter.