Stock Market Cycles And Timing The Market
It is important to understand seasonal patterns. You will make a lot more money from trading just by knowing when the best time of year to buy stocks is. Do not get smacked by a market plunge because you did not know the yearly patterns. These seasonal trading patterns do not always occur every year but they do occur more often than not.
November through April is the best 6 months of the year for stocks. Institutional traders come back from their summer vacations in September and they are eager to put clients money to work. The sell in May and go away cliche comes into play at the start of the weakest 6 months of the year.
May through October is the worst 6 months of the year for the stock market. In fact, 7 of the 10 worst months in stock market history have occurred between May and October. Over the last few years, market sell offs have often come in April as traders try and game May and the start of the weakest 6 months of the year. When the wall of profit taking hits in April or May, new traders are caught completely off-guard.
In the best 6 months of the year, you should use a trend following strategy. Buy high and sell even higher will work. In a rising tide, all ships have a tendency to rise. So too do stocks during the best 6 months of the year. When you see a stock that pulls back during this time of year, you can jump in and buy it and you will often be rewarded. It really is good times during the best 6 months of the year.
In the worst 6 months of the year, you have to watch out for buying stocks on a pull back. What seems like a pull back and a good entry can turn into a sustained downtrend very easily during this time of year. Also, breakout patterns can often turn into head fakes. Put more of an emphasis on your oscillator indicators like the stochastic during this time of year. The Bollinger Bands often contract during this time of year as trading ranges compress.
The transition periods between the best 6 months of the year and the worst 6 months of the year mark the greatest volatility periods. In the months of September or October, a high volatility bounce is more likely to occur as the market transitions into the best 6 months of the year. In the months of April or May, volatility usually spikes as the market sells off and profit taking kicks in.
While knowing when the best and worst 6 months of the year will occur, you can greatly improve your trading profits by getting on the right side of the trade. The worst thing you can do is to ignore these seasonal cycles and try to use the same stock trading strategy all year round.
November through April is the best 6 months of the year for stocks. Institutional traders come back from their summer vacations in September and they are eager to put clients money to work. The sell in May and go away cliche comes into play at the start of the weakest 6 months of the year.
May through October is the worst 6 months of the year for the stock market. In fact, 7 of the 10 worst months in stock market history have occurred between May and October. Over the last few years, market sell offs have often come in April as traders try and game May and the start of the weakest 6 months of the year. When the wall of profit taking hits in April or May, new traders are caught completely off-guard.
In the best 6 months of the year, you should use a trend following strategy. Buy high and sell even higher will work. In a rising tide, all ships have a tendency to rise. So too do stocks during the best 6 months of the year. When you see a stock that pulls back during this time of year, you can jump in and buy it and you will often be rewarded. It really is good times during the best 6 months of the year.
In the worst 6 months of the year, you have to watch out for buying stocks on a pull back. What seems like a pull back and a good entry can turn into a sustained downtrend very easily during this time of year. Also, breakout patterns can often turn into head fakes. Put more of an emphasis on your oscillator indicators like the stochastic during this time of year. The Bollinger Bands often contract during this time of year as trading ranges compress.
The transition periods between the best 6 months of the year and the worst 6 months of the year mark the greatest volatility periods. In the months of September or October, a high volatility bounce is more likely to occur as the market transitions into the best 6 months of the year. In the months of April or May, volatility usually spikes as the market sells off and profit taking kicks in.
While knowing when the best and worst 6 months of the year will occur, you can greatly improve your trading profits by getting on the right side of the trade. The worst thing you can do is to ignore these seasonal cycles and try to use the same stock trading strategy all year round.
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