Wednesday, 4 January 2017

'Monthly' Effect of the Stock Market

Apparently one can link different months in a year to different effects on the stock market.

We often hear the adage 'Sell in May Buy in November' where people believe it's best to avoid the market turmoil in the period between May and Nov.

http://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp

We also often see the annual year end window dressing period in December leading to the nicely named 'Santa Claus Rally'.

I recently read about the January effect on the stock market for the rest of the year as well.

Basically analysts believe the first week of trading in January has a profound significance in predicting how the market moves for the rest of the year.

https://tradingsim.com/blog/january-effect/

So if you believe in these 'monthly' theories, your trading / investing strategy will be very much simplified.

Forget about the chart readings.

1) Just observe the market movement in the first week of January and long / short the market accordingly.

2) Clear your portfolio in May and restart in November.

3) Lastly sell in the last week of December.

Have you tested this simple theoretical strategy before?

Feel free to share your thoughts about it 🙂

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