- What Is the Best Possible Time to Trade - October 26, 2020
- How To Identify Seasonal Patterns in The Stock Market - September 16, 2020
- The Best Way To Manage Risks in Trading - August 26, 2020
Now it is important to start with an understanding that almost everything that people do has some type of seasonal cycle associated with it. The stock market, too, has a season associated with it. While the phenomenon is pretty complex and hard to explain in a few words, it is possible for traders to take advantage of it. Furthermore, mid and long-term investors can also benefit from these changes. Some short-term traders may also be able to make a few bucks based on this information.
Now it is a commonly accepted perception that the majority of money in the stock market is to be made between November 1st and April 30th, which is also incidentally winter. On the other hand, the period between May 1st and October 31st, i.e., the summer, should be avoided. That said, this is just a legend with no data to back it up.
The so-called legend led two Massey University professors to draft two articles on this very subject in 2012 entitled “Are Monthly Seasonal Real?”, The other was “Three Century Perspective and The Halloween Indicator: Everywhere and All the Time.” The papers included results from over 108 countries over a period of 319 years, which suggests that the divide between Winter and Summer is real.
The two most profitable months for traders are December and January; on the other hand, October and September tend to be the worst. So, there is reason to believe that winter tends to be on average more profitable as compared to the hot season, though it does not mean that the markets will swing in this same direction each year.
Now, if you are to observe over 300 years of history, there are going to be many outliers. However, the pattern, in general, is what needs to be looked at, as it outlines the nature of fluctuations in different seasons. At the end of the day, it is up to you to use this knowledge as a trader.
How can this information be helpful? Now, if you are a bullish investor, you will opt to trade during months where the return is highest, i.e., April, January, and December. On the other hand, an investor that chooses to short a position, i.e., a Bearish one, will decide to trade in October, September, and July.
While seasons do play a role as observed, it also depends on your trading strategy. Though when it comes to playing in the financial market, every little bit of information can potentially give you an edge.
Open a Free IQ Option Demo Account by Clicking the Green Button Below
General Risk Warning:Binary options trading carries a high level of risk and can result in the loss of all your funds
Binary and digital options are prohibited in EEA
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.
Start trading now with our recommended Binary Options Brokers.
Start trading now with Binary Option Robot
|Min. Invest||Min. Deposit||Max. Returns|
|All brokers >>|