I did not know anything about the best and worst 6 months of the year when I first started trading, what a mistake that was. All year round I would use the exact same stock trading method. The market would often surprise me and I would take big losses. The best stock trading method to use is to split the year into the strongest and weakest 6 month periods.
The best 6 months of the year for the stock market is from November to April. This is the time of the year when the market goes up the most. All stocks have a tendency to go up during this time of year, even small caps. Between the months of November and April, the market has had some of the best strong uptrends.
May through October is the worst 6 months of the year for stocks. Markets go down more than they go up during this time of year. Huge sell offs occur in anticipation of the worst 6 months of the year. When the huge profit taking starts, traders that do not know about the worst 6 months of the year are crushed.
During the best 6 months of the year, you can go long just about anything and ride it up for profit. Offensive sectors have a tendency to do a little better during this time of year. The offensive sectors are Technology, Finance, and Energy. During this time of year, do not be afraid to buy a stock on a pull back. Even buying stocks on a breakout work during this time of 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.
Keep in mind that the worst losses come as the market changes into either the best 6 months of the year, or the worst 6 months. This means that the months of May and November are especially dangerous. Usually what you can do is to demand confirmation of the start of either the best 6 months of the year or the worst 6 months of the year. You get this confirmation by looking at the MACD either in the daily or weekly time frames.
I know that identifying the best and worst 6 months of the year seems like a really simple strategy. It is. Often in trading, the simpler the lesson is, the better it works. Just remember, do not ignore these 6 month patterns like I did when you are learning to trade.
The best 6 months of the year for the stock market is from November to April. This is the time of the year when the market goes up the most. All stocks have a tendency to go up during this time of year, even small caps. Between the months of November and April, the market has had some of the best strong uptrends.
May through October is the worst 6 months of the year for stocks. Markets go down more than they go up during this time of year. Huge sell offs occur in anticipation of the worst 6 months of the year. When the huge profit taking starts, traders that do not know about the worst 6 months of the year are crushed.
During the best 6 months of the year, you can go long just about anything and ride it up for profit. Offensive sectors have a tendency to do a little better during this time of year. The offensive sectors are Technology, Finance, and Energy. During this time of year, do not be afraid to buy a stock on a pull back. Even buying stocks on a breakout work during this time of 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.
Keep in mind that the worst losses come as the market changes into either the best 6 months of the year, or the worst 6 months. This means that the months of May and November are especially dangerous. Usually what you can do is to demand confirmation of the start of either the best 6 months of the year or the worst 6 months of the year. You get this confirmation by looking at the MACD either in the daily or weekly time frames.
I know that identifying the best and worst 6 months of the year seems like a really simple strategy. It is. Often in trading, the simpler the lesson is, the better it works. Just remember, do not ignore these 6 month patterns like I did when you are learning to trade.
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