Warning: Following my trades may be hazardous to your financial health. See Disclaimer.

Thursday, February 02, 2012

Use Seasonality to Optimize Timing of Trades

While technical analysis may be the only tool many traders use to place trades, seasonality can be used to further increase a traders odds.
  1. Buy in October. Or September if you have bigger appetite.  September is the weakest month.
  2. Buy on dip before major holidays.  Optimism and patriotism around holidays can cause upward bias.
  3. Sell losers ahead of the crowd in December for capital losses tax write-down.
  4. Buy small caps or big losers at the end of the year in anticipation of the January Effect.
  5. Market tends to be weak in the middle of a month, and strong around the turn of a month due to window dressing and mutual fund activities.  Quarter ends should have even bigger effect.
  6. Sell on Friday and buy on Monday.  Friday is the strongest day while Monday tends to be the weakest day.