Sunday, September 21, 2014

Sept 21 - Monthly trading patterns: Human behavior shapes market activity

Another interesting article regarding monthly patterns.

Taken from the article by Jeffrey Hirsch.

"Throughout the history of the Stock Trader’s Almanac the stock market’s performance has been examined on a yearly, monthly, weekly, daily, and half-hourly basis to uncover trends and tendencies. Nearly a half century’s worth of research has confirmed time and time again that the beginning, ending, and middle of months, weeks, and days have significance.

This should not come as a shock to members of the human race. We place a great deal of emphasis on routine, marking the start and finish of nearly everything in our lives. From the alarm clock that wakes us to mealtimes to monthly bill paying to birthdays and anniversaries, we are creatures of routine and habit. Sometimes beginnings are fraught, encountered with anxiety, sadness, and fear; other times they are merrily celebrated. Endings are the same.
This carries over to the stock market. After all, the markets are traded by people and even the computers we rely on so heavily have been programmed by human beings. Understanding the market’s usual daily, weekly, monthly, quarterly, and annual rhythms may help you make better investing and trading decisions. They may offer you the opportunity to ride the cycle when they present in typical form, or respond differently when other events trump historical patterns."

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