Why I Trust The Close: February Seasonality, Pullback Psychology, And A Cleaner Trading Process

*Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Thursday from 11am ET, as our risk management educator. With 30 years' experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading. Below are some excerpts of Bob’s thoughts from a recent live session. If you’d like to save your seat to watch and participate in the next session, register here.

Most traders do not lose money because they cannot read a chart. They lose money because they make decisions off intraday emotion instead of end-of-day structure. If you want a cleaner process, you need to stop treating every fast move like a crisis and start prioritizing what the market does at the close.

Let’s bring this into the real world of how markets actually trade, especially around this time of year. February tends to be one of those months where traders get whipsawed mentally if they are not grounded in a process. You can still have that early-year momentum working, but you also start to see a lot more two-way trade. Rotation gets messy. Headlines get louder. Traders start searching for a story that “explains” every red candle.

And this is where the difference between professionals and impulsive traders shows up.

Professionals do not need a story to execute their plan. They need structure, risk parameters, and consistency.

So today I want to expand on three things:

• Why the market can feel chaotic even when the move is normal
• What February seasonality actually means in practice
• Why close-based decision-making can keep you out of trouble

A lot of traders confuse volatility with danger. They see a fast intraday drop and assume something is broken. But many intraday moves are just repositioning and liquidity dynamics, not a change in trend.

Here is a simple reality:

• A modest pullback from highs is not a breakdown.
• A string of down days is not automatically bearish.
• A scary intraday candle is not a thesis.
  

What I look for is whether the market is showing persistent pressure, and that usually shows up in two places:

1) Consecutive lower closes

This matters more than “one big red day.” A series of lower closes tells you selling pressure is sustained, not just emotional.

2) Where the weakness is concentrated

Often, the ugliness shows up first in high-volatility names and the “story stocks,” not in the broad market. That matters because broad indexes can look fine while leadership is rotating underneath.

And when traders feel that rotation, they interpret it as chaos because their favorite names are getting hit even while the index holds up.

That disconnect is a big reason why people trade emotionally in February. It is not that the market is broken. It is that leadership is changing, and the tape is forcing people to adjust.

I am not interested in seasonality as a fortune-telling tool. Seasonality is not a trade trigger. It is context.

February often behaves like a transition month. Here is what I mean by that:

• Traders start repricing expectations after the first burst of the year
• Earnings season is still influencing sentiment, but the “easy surprises” fade
• Positioning gets cleaned up after January performance chasing
• You can see sharper rotations between sectors and themes

That is why February can feel choppy. The market is not necessarily going down. It is often reallocating.

Seasonality should make you ask better questions, like:

• If I am trading short-term, am I prepared for more head fakes?
• If I am trading swing timeframes, am I giving the trade room to breathe?
• If the market is rotating, am I forcing trades in names that are losing sponsorship?

They do things like:

• Assume weakness must happen because “February is choppy”
• Assume strength must happen because “the first quarter is strong”
• Use seasonality to override chart structure

That is backwards. Seasonality can inform your expectations, but it cannot replace your entry and exit logic.

Let me be blunt. If you want to lose money consistently, start using the word “should” as if it is analysis.

• “It should bounce here.”
• “This should not be happening.”
• “I should have bought more.”
• “I should have held it longer.”

That word creates a fake standard that markets do not care about.

Markets do not owe you a bounce. They do not owe you a pattern completion. They do not owe you symmetry.

When you say “should,” you are usually revealing that you are emotionally attached to an outcome rather than committed to a process.

The close matters because it reflects where market participants are willing to hold risk when the session is over.

Intraday prints can be noise.

• Stops get triggered
• Liquidity thins out
• Headline reactions create temporary dislocations
• Algorithms push price to levels that attract liquidity

Then price snaps back.

If you are making decisions off the wick, you are often making decisions off the most emotional part of the session.

So I prefer close-based logic, especially for swing-style trading and for anything where the setup is built on daily or weekly structure.

You have to size properly.

Close-based systems often imply wider stops. That is not a flaw. It is a feature. But the size has to match the stop.

If you cannot tolerate the drawdown without improvising, you are over-sized. Period.

“It always bounces here” is usually a trap

This is one of the most expensive phrases in trading.

Support that has been tested multiple times can be support, but it can also be a warning. The more times a level gets hit, the more information the market is collecting about it.

Sometimes it is accumulation. Sometimes it is absorption before a break.

Either way, the correct approach is not to assume the level must hold. The correct approach is to define invalidation.

Here is the only question that matters:

• Where am I wrong?

If you cannot answer that in one sentence, you are not trading. You are guessing.

This is a framework that improves decision-making immediately.

Stops

A stop should be placed where the market is proving your idea wrong, not where you feel uncomfortable.

That level should reflect real structure. It should not be the obvious place everyone else is using, because obvious stops get tagged.

Targets

Targets should be realistic. They should be placed at levels that price can reach without requiring a miracle.

Many traders do the opposite:

• Tight stop at a noisy level
• Target far away because they want a big winner

That combination produces a lot of small losses and very few realized gains.

And then people call it “bad luck.”

It is not bad luck. It is poor structure.

A seven-point stop is not risky. A seven-point stop with the wrong position size is risky.

The correct sequence is:

• Define the maximum dollar loss per trade
• Identify the price level that invalidates the thesis
• Measure distance from entry to invalidation
• Size the trade so a stop-out equals your planned loss

This is how you avoid the February trap.

The February trap is taking normal volatility personally and then overreacting. If you size correctly, you can sit through normal noise and wait for structure to resolve.

Here are a few process-level adjustments that help in a choppier month:

• Trade fewer names, but trade them cleaner
• Avoid forcing trades in stocks that are losing sponsorship
• Focus on level-based invalidation, not headline narratives
• Expect more fake-outs and reduce leverage accordingly
• If you are short-term trading, be quicker to take partial profits
• If you are swing trading, give the trade room and respect the close

Notice what is not on that list: predicting the month.

When February trading becomes two-sided, the market is testing whether you have a process or a collection of opinions.

So here is the checklist I want you to leave with:

• Zoom out before you conclude anything
• Use seasonality as context, not as a trigger
• Let the close do the talking
• Define “wrong” with structure, not emotion
• Size the trade so being wrong is survivable
• Remove “should” and “always” from your vocabulary

That is how you stay consistent when the tape gets messy and traders start chasing stories instead of managing risk.

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