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The Stupidest Traders Make Millions Strategy

Posted On : December 21st, 2011 | Updated On : December 21st, 2011

Some have stated that traders make millions trading the SPY close to key U.S. holidays. I'm going to expose their barely known secret then let you make a decision if it is genuine. This concept has zilch to do with fundamental or technical analysis. It is all about probabilities. I'll be straightforward with you, I am not comfortable with trading probabilities. The man who is, known only to me as Frank, has shutdown his blog. Frank says that stock traders who buy at the end of trading on the first day of the year, then sell at the end of trading on the following day make millions. This is called the New Year's Day Trade. So I researched SPY and here's the upward move in 2010: 0.2% What did you say? You would need to be trading with tens of thousands of dollars to get happy about a 0.2% move. And if you had that large amount of money would you really be gambling it away like this on a dicey probability stock trading method? Frank thinks that an additional U.S. holiday that traders make millions on is Washington's Birthday. He says short at the close of trading right before Washington's Birthday, then close the short at the end of trading on the next trading day. So I researched the S&P 500 and here is what would have happened in 2010: 1.8% gain. Come again? SPY rose 1.8% which implies had you gone short the market, you would have lost 1.8% in the move. Suddenly it starts to make a little more sense that Frank's probability stock trading blog is closed down. Provided this was such a meaningful method of stock trading, then why did the gentleman close down his blog? Might it be that his probabilities stock trading technique is a bust? General seasonal patterns are one thing, but this probability trading is another creature entirely. Seasonality works because there are fundamental things happening at particular times of the year: money manager repositioning at end of quarter, tax selling, elections, summer vacation, etc. I am not in love with the idea of buying something just because it is a certain day of the year. I fancy technical analysis and stock charting to establish the trend, then stock trading with the trend.

Posted in : stock trading
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