By: Katie Gomez

We all know October is the scariest month of the calendar year and the stock market year. Full of tricksters and traps, Halloween can be tricky to navigate without the right tools. As October casts its shadows across Wall Street, traders know that Halloween brings more than just pumpkin spice and costumes—it historically delivers some of the market’s most spine-tingling volatility.

Yet, like a savvy trick-or-treater who knows which houses give out full-size candy bars, experienced traders understand that October’s heightened volatility can offer both frightening tricks and profitable treats. Seasoned traders discover the “Halloween Effect,” which has consistently shown that while some investors get spooked by short-term market fluctuations, others find opportunities in the shadows of uncertainty. As we navigate this year’s October trading landscape, distinguishing genuine opportunities from dangerous tricks becomes crucial for protecting your portfolio and capitalizing on seasonal market movements. In this article, I will explain the three tricks traders often fall for in October and how to replace them with sweet treats.

Three Spooky Tricks to Watch Out For

1. The FOMO Ghost

Like a phantom appearing in the market’s most volatile moments, FOMO (Fear Of Missing Out) haunts novice and experienced traders during October’s heightened market activity. This spectral presence whispers seductive promises of missed fortunes, driving otherwise rational investors into impulsive decisions that can turn their portfolios into graveyards of poor choices. Like a ghost can walk through walls, the ghost of FOMO can just as easily penetrate a trader’s portfolio if they don’t move carefully.

This ghost frequently haunts traders and can be hard to evacuate, especially in the most volatile month of the year. FOMO can lead traders down the path of impulsive investment decisions, succumbing to the herd mentality. Here are warning signs to recognize when you might be visited by the FOMO ghost this Halloween. 

Recent history is littered with cautionary tales of FOMO’s destructive power. The 2021 meme stock frenzy serves as a chilling reminder where countless traders, haunted by visions of overnight riches, jumped into stocks like GameStop and AMC at their peaks, only to watch their investments evaporate faster than morning mist. The crypto market crash of 2022 provides another stark example, where FOMO-driven buying at all-time highs led many investors into a spiral of losses when the market dramatically reversed.

Recognizing FOMO’s presence is crucial for survival in October’s trading environment. Watch out for these warning signs to avoid the FOMO ghost claiming you as its next victim:

• Rushing to enter trades without proper analysis
• Increasing position sizes beyond your normal risk parameters
• Checking social media obsessively for trading tips
• Making decisions based on others’ proclaimed gains
• Feeling anxious about missing out on trending stocks

The most effective protection against this market phantom isn’t garlic or holy water but rather a solid trading plan and unwavering discipline. Remember, like all ghosts, FOMO’s power over you exists only if you believe in it. By maintaining strict adherence to your pre-defined strategy and risk management rules, you can prevent this spectral visitor from turning your October trading into a horror story.

2. The Pump and Dump Phantom

Again, October can cause traders to do uncharacteristic things they usually wouldn’t risk, and another entity encouraging these impulse decisions is the pump-and-dump phantom. Like a shapeshifting specter that preys on unsuspecting victims, the pump-and-dump phantom becomes particularly active during October’s volatile market conditions, manifesting through orchestrated schemes where fraudsters artificially inflate stock prices through misleading promotions. 

This malevolent market spirit has evolved in the digital age, haunting social media platforms through coordinated Discord alerts, mysterious Twitter financial influencers, Reddit threads promising “guaranteed moonshots,” TikTok videos showcasing unrealistic gains, and Telegram groups claiming exclusive insider information. The telltale signs of this phantom include sudden unexplained price surges, coordinated posting patterns across platforms, suspicious account histories, and companies with vague press releases or limited SEC filings.

To ward off this evil spirit, traders must implement protective measures, including thorough research of company fundamentals through SEC filings, monitoring unusual volume spikes, and maintaining a skeptical approach to social media claims. October 2023 provided a chilling example of a small tech company’s stock rising 300% in two days based on artificial AI partnership hype, only to crash 80% when the claims proved hollow. 

Remember, like all supernatural entities, the pump-and-dump phantom’s power lies in deception – legitimate trading opportunities rarely require urgent action or promise guaranteed returns. By following defensive measures such as strict position sizing, religious use of stop-loss orders, and trusting verified news sources over social media hype, traders can protect themselves from this phantom’s malevolent influence and ensure their October trading doesn’t become a horror story of lost capital.

The Technical Analysis Trap

The Technical Analysis Terror lurks in October’s shadows, tempting traders into its deadly trap with seemingly reliable seasonal patterns and historical trends. Like a haunted house mirror that distorts reality, over-reliance on technical indicators during this volatile month can lead traders astray, as traditional patterns often break down amid increased market uncertainty.

Seasoned traders know that while technical analysis is a valuable tool, blindly following indicators during this spooky season without considering the broader market context, fundamental factors, and current market conditions can transform promising trades into terrifying losses. However, As one wouldn’t enter a haunted house without a flashlight, traders shouldn’t navigate October’s markets with technical analysis alone.

3 Tasty Treats to Sweeten your Portfolio 

On the other hand, if you can avoid being haunted by these Halloween tricksters, you can focus on collecting new treats for your portfolio. Despite the Halloween effect, a staggering amount of consumer money is spent on this holiday; the National Retail Federation has estimated that Americans will likely spend a staggering $8.8 billion on Halloween candy, costumes, and decorations this year. However, the momentum has slowed lately as the last two years saw at least $9 billion in spending. About 15% said tariff concerns will disturb their Halloween plans. Regardless, retail sales will be on a roll in the upcoming days, making certain EFTs and stocks look tastier to traders than any chocolate bar. 

1. VanEck Vectors Retail ETF RTH

Several discount retailers, such as Costco COST, Ross ROST, Dollar General DG, and Wal-Mart WMT, have exposure to this fund.

2. Global X Social Media ETF SOCL

Gone are the days of originality when it comes to creative costumes, as most people admit to finding their perfect costume on social media (Twitter, Reddit, Instagram, TikTok, Pinterest, etc.) Nearly 49% of Millennials have purchased Halloween items to share them on social media posts, turning SOCL into a focal point for ETF investments this month.

3. Dollar General Corporation DG

Dollar General looks like the best stock pick for this Halloween season, given we are still on the brink of a recession and inflation is skyrocketing; people want cheap and easy this year, leading them to America’s #1 discount retail store. Discount stores are generally busy shopping destinations, but Halloween turns that store into a frenzy. Dollar General is one of the largest discount retailers in the United States. Currently, DG ranks in the top 11% of Zacks industry.In conclusion, whether it’s avoiding the ghostly siren call of FOMO, the jumpscare of the pump and dump phantom, or the trapdoor of technical analysis, it is crucial for traders to move cautiously this Halloween. With the market closing out on one of the most volatile months it has seen, traders who tread carefully and navigate tricks successfully might just end up with a treat. Visit Trade Ideas today For more tricks to avoid or access to new tasty treats this Halloween season.