How to Trade While on Vacation
Some of us may once again be contemplating a key question: When does vacation start?
For many stock traders, answering it could prove surprisingly challenging. While the pandemic has been no one’s idea of fun, it has left stock traders with plenty of time to monitor their portfolios. One study found a pretty significant uptick in trading activity after the pandemic started, with more people opening new brokerage accounts and established traders entering more positions than usual.1
Now that vacations are slowly returning, though, traders who wiled away their lockdown days poring over stock charts may find it’s not so easy to look away, no matter how badly they need a break. That’s not to say relaxation and returns are mutually exclusive. But it does make sense to really think about your trading before you suddenly find yourself off the grid for a couple days.
So, before you head out, think through the following four questions to help decide whether—and how—to trade on your next vacation, whenever it may be.
1. What kind of trader are you?
First off, consider your time horizon. If you’re a short-term trader accustomed to buying and selling positions within a single day, you might want to just disconnect. After all, you’ll have time for little else if you’re constantly monitoring the market for profit opportunities.
It’s a different story for swing and intermediate-term traders, who hold positions from a couple of days to several months, respectively. The question isn’t whether to obsessively monitor your positions but rather which order types you can use to protect your positions while you’re away. The key is to add some built-in protection, so be sure to place bracket orders—identifying your stop and profit prices—on every open position before you leave. This can help limit your losses if the market moves against you, or lock in your desired profit if things go as you hope.
2. How much time will you realistically have to trade?
If the answer is none, you should close out your positions before heading out, particularly if you’ll be away for a while. Otherwise, you should be able to keep them open, with a bracket order in place, even if you have only a few minutes to check on them each day.
If that’s the case, here’s how to make the most of your limited time online:
- Each day, either after the market closes or before it opens for trading, briefly scan the news to see how the market is shaping up and if there are any developments that might change your views on your existing holdings.
- If your views have changed, consider altering your bracket order to align with your new thinking.
- You could also add a position, assuming you’ve done your homework and the price is right.
For the latter, use a conditional order—one that triggers a purchase only if certain conditions are met—and even then place a bracket order to protect your downside and lock in your upside.
3. How connected will you be?
Traveling can mean hours or even days without a reliable internet connection. Roughing it on a weeklong camping trip is a grand adventure—but it’s not great for trading. Neither is a Paris apartment that promises speedy Wi-Fi but fails to deliver.
If you suspect your internet access may be unreliable, set up email or text alerts so you’ll be notified via cellular service if certain market conditions are met. You can do this not only for price and volume changes but also stop losses, margin warnings, and bid and ask prices. You can even set expiration dates for each alert to keep intrusions to a minimum (see “Alerts on the go,” below).
Of course, if you think there’s a chance your internet access may be compromised completely, you might want to play it safe and close out your positions ahead of time.
4. How has your trading performance been?
Let’s face it: We all go through rough patches. Emotion can get the best of us when losses start to pile up, leading to some less-than-optimal decisions. At times like these, the best course of action may be to take a mental break—and there’s no better time for doing so than a holiday.
Even if your trading portfolio has been performing well, it can help to step away from the screen. We’ve all felt the push and pull of watching market prices move minute by minute, and sometimes the best way to enforce discipline is to hang back and let your automatic orders mind the store.
The time away might also give you a chance to reflect on your performance. The storied investor Jesse Livermore, for example, made a point of locking himself in a Chase Manhattan bank vault the last weekend of every year to analyze all the trades he’d made over the previous 12 months. Nobody’s suggesting you spend your hard-earned vacation inside a bank vault, but a little self-reflection without the day-to-day distractions of the market can help recharge your batteries for when you do return to trading.
1Regina Ortmann, Matthias Pelster, and Sascha Tobias Wengerek, “COVID-19 and investor behavior,” Elsevier Public Health Emergency Collection, 8/8/2020.
What You Can Do Next
- Read more insights from Lee Bohl and other Schwab trading specialists.
- Register for an upcoming weekly trading webcast that fits your schedule.
- Schwab clients: Set up alerts for current and prospective holdings.